Lagged price of maize was found significant at all conventional levels with a negative coefficient of -0.355482. This was expected and consistent with the findings
of Townsend and Thirtle21
(1997) who found a negative relationship. The coefficient is the short-run cross price elasticity of tobacco to price of maize in Zimbabwe. This implies that an expected 10% increase in relative price of maize in one year causes a fall in tobacco supply of 3.6% the following year. In addition the cross-price elasticity is less than 1, therefore, supply of tobacco is inelastic to changes in prices of its substitutes in production as also noted by Townsend and Thirtle (As
expected, supply of tobacco was found positively related to population of tobacco farmers
(lnATG
t
). A positive coefficient of 0.265710 which is significant at 10% level was estimated. The results do concur with the predictions of the micro-economic theory of supply which posits that
as new firms enter the market, quantity supplied increases. This coefficient indicate that an annual 10% increase in the number of tobacco growers will cause about 2.6% rightward shift of the tobacco supply function. These findings are also comparable to those of Dean (1966) who also found a positive relationship in Malawi.
A negative coefficient for the quadratic time trend variable was expected but a positive significant coefficient of 0.001246 was found. This indicates that in the long-run, the tobacco supply function exhibits increasing returns to advances in technology. This positive sign contradict with the findings of Leaver (2004) who found a negative relationship between the quadratic time trend and tobacco output. A possible explanation for this is that there is a slow rate of technology adoption in Zimbabwe.
The coefficients for the simple time trend and sales quota dummy variables were unexpectedly found to be statistically insignificant at all conventional levels.
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