Agricultural supply response in Ethiopia
Alemu, Zerihun Gudeta
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This study had one major goal of measuring the responsiveness of agriculture to policy and non-policy related events. This was divided into three major objectives, namely, the contribution of agriculture to overall GDP growth, the responsiveness of aggregate agriculture to policy and non-policy related events, and the responsiveness of cereal producers to incentive changes. A number of econometrics procedures were employed to achieve the objectives of this study which ranged from simple descriptive statistic techniques to advanced time series econometrics. One of these methods introduced an improvement to the conventional method of tests on the data generating process when a series is characterized by a break. In addition, due to lack of available econometrics or statistical packages tailored to achieving specific needs of this study, two computer programs were developed. The first program was used to decompose changes in the mean and variance of cereal production into four and ten component parts respectively. The second program was used to extract cycles from agricultural GDP and to determine periods of cyclical fluctuations. The following were major findings of this study with regards to the first major objective: much of the growth in overall GDP has been the result of growth in the manufacturing and the services sectors; structural transformation has not yet been attained; and the contribution of agriculture in stimulating growth in other sectors of the economy has been positive in economic systems and policy environments where agriculture has been allowed to operate freely. The following were the major findings of the study with regards to the second objective. The responsiveness of aggregate agriculture has so far been affected more by natural factors such as drought and fluctuations in aggregate agriculture are cyclical. The latter was attributed to weather variability. With regards to the third objective, the following were found: the crop sub-sector is responsive, the country is increasingly becoming food insecure as a result of the susceptibility 0:. the crop sub-sector to changes in weather patterns. The following are the recommendations of this study. Agricultural Development Led Industrialization strategy (ADLI) is the current development strategy of the country. For this strategy to achieve its short-and long-term objectives, the following measures are recommended. First, problems associated with state ownership of land should be harnessed. Second, market improvement and infrastructural development must be integral parts of the development planning process. Third, agriculture should be freed from policy constraints. Fourth, macro-policy reforms and efforts that enhance the responsiveness of agriculture at various stages should be encouraged. Fifth, agricultural research and agricultural extension capacity of the country must be encouraged to increase the supply of new drought varieties to mitigate the effect of drought on the instability of crop production.
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