Research Article Open Access

An Empirical Analysis of Supply Response of Rubber in Malaysia

Ghulam Mustafa1, Ismail Abd Latif1 and Henry Egwuma1
  • 1 Department of Agribusiness and Bioresource Economics, Faculty of Agriculture, Universiti Putra Malaysia, 43400 UPM Serdang, Selangor, Malaysia

Abstract

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.

American Journal of Agricultural and Biological Sciences
Volume 11 No. 4, 2016, 148-156

DOI: https://doi.org/10.3844/ajabssp.2016.148.156

Submitted On: 11 October 2016 Published On: 25 November 2016

How to Cite: Mustafa, G., Latif, I. A. & Egwuma, H. (2016). An Empirical Analysis of Supply Response of Rubber in Malaysia. American Journal of Agricultural and Biological Sciences, 11(4), 148-156. https://doi.org/10.3844/ajabssp.2016.148.156

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Keywords

  • Malaysia
  • Supply Response
  • Rubber
  • Vector Error Correction Model