An Empirical Analysis of Supply Response of Rubber in Malaysia
Ghulam Mustafa, Ismail Abd Latif and Henry Egwuma
DOI : 10.3844/ajabssp.2016.148.156
American Journal of Agricultural and Biological Sciences
Volume 11, Issue 4
Supply response of rubber to changes in economic incentives is analysed using co-integration approach. Time series data is taken for the period 1990 to 2014 and the vector error correction model framework has been applied. The empirical results confirmed the existence of a unique long-run equilibrium relationship among planted acreage, the relative price of rubber and price of fertilizer. Further, the estimates suggested that rubber supply is significantly influenced by the relative price of rubber and the price of fertilizer. The estimated short- and long-run elasticities of acreage with respect to relative price are respectively 0.04 and 0.77, while the short- and long-run elasticities of acreage with respect to fertilizer price are -0.20 and -0.28 respectively. The study recommends the design of an appropriate economic incentive structure to stimulate output and hence the income of farmers.
© 2016 Ghulam Mustafa, Ismail Abd Latif and Henry Egwuma. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.