Abstract

The importance of getting supply response correct is critical to analysis of policy. The literature on structural adjustment and the debate over price incentives versus public investment in technology as means of stimulating agricultural growth in developing countries yielded several broad surveys of supply response all emphasizing the key role of accurately assessing supply response. For OECD countries where interest in domestic policy influence on agricultural production is piqued due to ongoing agricultural negotiations in the WTO, policy modeling efforts have similarly drawn attention to the issues of supply response in agriculture. This report offers a survey of the current literature on supply response, with a particular emphasis on the separate contributions of acreage and yield response. We bring together the varied estimates of supply response to price and policy changes for comparative analysis based on the elements used to generate the estimates. In order to view this diverse literature through a common lens, we use the OECD-PEM framework as a vehicle for decomposing and assessing supply response at the aggregate level, as it arises from farm-level adjustment in the supply of primary factors and input substitution.

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