YIELD RESPONSE TO PRICES: IMPLICATIONS FOR POLICY MODELING

We examine the determinants of own-price output supply response in policy models, focusing primarily on the OECD-PEM equilibrium displacement model. Reviewing expert assessments and econometric literature estimates we find that there is evidence to both support and challenge the relatively high supply response of a model like the OECD-PEM. We also consider possible avenues of reconciliation between evidence that supports and challenges the assumed supply response in the OECD-PEM model. Our analysis of supply response in the OECD-PEM case and from reviewing literature leads us to recommend that future econometric investigation be focused on the role of farm household owned resource mobility as it contributes to agricultural supply response.