@article{Sapelli:173193,
      recid = {173193},
      author = {Sapelli, Claudio},
      title = {Inflation, capital markets and the supply of beef},
      journal = {Agricultural Economics: The Journal of the International  Association of Agricultural Economists},
      address = {1993-08},
      number = {968-2016-75489},
      pages = {10},
      year = {1993},
      abstract = {This paper puts forward an explanation for the negative  elasticity of supply of beef found
in many LDC's. As is  explained by Jarvis (1974), the elasticity of supply of  beef may be
negative in the short run due to the dual role  of cattle as both a capital and a consumption
good. But in  some LDC's, and especially in Latin America, one may find a  long-run
negative association between slaughter and prices,  that cannot be explained by assuming
shocks to slaughter  are causing changes in prices. It is no coincidence that  Jarvis' hypothesis
itself was developed to explain  developments in Argentina, a country with chronic  high
inflation. The paper argues that this long-run  relationship cannot be explained by the Jarvis
hypothesis,  and offers an alternative hypothesis based on the demand  for cattle as a hedge
against inflation.
The long-run  negative association between slaughter and prices has been  found in high
inflation countries. High inflation combined  with excessive regulation of capital markets
cause the well  known phenomenon of desintermediation. It is argued here  that cattle plays
a role in the inflation hedged portfolio  that is then demanded. Therefore, with imperfect
capital  markets the supply of beef is affected by the demand for  cattle as an asset, and this
demand, in turn, is affected  by inflation. This paper will only attempt to prove the  link
between imperfect capital markets and the supply of  beef. The way inflation in a repressed
capital market leads  to an imperfect capital market is not addressed here, for  reasons of
brevity. The paper will develop a model that in  the context of imperfect capital markets
results in a  negative elasticity of supply. The model will then be  tested with Uruguayan data.
Uruguayan data are very  adequate to test the hypothesis because they cover both a  period
without inflation and a period of high inflation.  The results support that cattle was used as
an alternative  to money holdings when inflation signified a big tax on the  latter. Inflation
therefore affected the demand for cattle,  or, conversely, the supply of beef.},
      url = {http://ageconsearch.umn.edu/record/173193},
      doi = {https://doi.org/10.22004/ag.econ.173193},
}