Faculty of social studies department of economics supply response of tobacco output to price changes in
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- CHAPTER FIVE SUMMARY, CONCLUSION AND POLICY RECOMMENDATIONS 5.0 Introduction
| 4.5 Conclusion The supply function for tobacco in Zimbabwe was estimated and empirical findings have been presented and interpreted. The short-run and long-run price elasticities of tobacco output in Zimbabwe were estimated and found that supply of tobacco is inelastic to changes in tobacco prices. Supply of tobacco was found to be significantly influenced by lagged tobacco output, population of active tobacco growers, expectations in tobacco and maize prices. Short-run technological changes and sales quotas were found to be statistically insignificant. Based on these findings, the following chapter provides the summary, conclusion and policy recommendations. 22 CHAPTER FIVE SUMMARY, CONCLUSION AND POLICY RECOMMENDATIONS 5.0 Introduction This chapter provides a summary of the study and conclusions drawn from the study. In addition, recommendations for policy and suggestions for further studies are given. 5.1 Summary and Conclusion The main aim of this study was to investigate the responsiveness of tobacco supply to changes in prices in Zimbabwe. Historical time series data for the period 1980 to 2015 were used to estimate the elasticities using the modified Nerlove (1958) supply response model and the OLS approach. E-views 7 statistical package was applied. The model passed all the diagnostic tests and also found significant at 1% level. Short-run technological improvements and institutional factors such as sales quotas were found insignificant. The study found tobacco supply to be positively influenced by expected tobacco prices, population of growers and advances in technology. Expected maize prices and previous output were found to inversely affect supply of tobacco. The short-run and long-run price elasticities of tobacco supply were found to be 0.12 and 0.16 respectively and the short-run cross price elasticity of tobacco supply to maize was found to be 0.35. Hence, the study may reject the hypothesis that supply of tobacco respond to price changes leading to the conclusion that tobacco supply in Zimbabwe is unresponsive to changes in both prices of tobacco and of other competing crops such as maize. Download 1.11 Mb. Share with your friends:
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