Supply Response and Investments in Agriculture in Andhra Pradesh

The present study explores the response of aggregate farm output, input use and farm investment decisions to output and input prices, wages, technological change, public investments, and climate factors. The study is based on district level panel data from Andhra Pradesh over 39 years. This study confirms the low short run aggregate output supply elasticity of Indian agriculture found in earlier studies. It also accepts the hypothesis that the relationship between public investment, financial institutions and farm investment of labor and capital in agriculture have not changed over the years. The empirical estimates of aggregate output supply elasticity with respect to output price (0.2), road (0.2), market (0.11), and net irrigated area (0.05) are higher than findings of study for selected states in India by Binswanger et al (1993). Aggregate agricultural output responds positively with banks and canal irrigation each with elasticity 0.01. The elasticity of wage (0.3) on aggregate output is higher than price elasticity (0.2) indicating effects of rising wages outweigh the incentives offered by output price support. Climate factor such as rainfall affect fertilizer use and aggregate output significantly. The study substantiates the findings of Binswanger et al (1993) that public investment in infrastructure and financial institutions respond to agriculture potential and agro-climatic endowments of districts.

Issue Date:
Oct 13 2011
Publication Type:
Conference Paper/ Presentation
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 Record created 2019-07-02, last modified 2020-10-28

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