Supply response of rice using time series data: Lessons from Khyber Pakhtunkhwa Province, Pakistan

Abstract

The present study is aimed at investigating the supply response of rice in Khyber Pakhtunkhwa using time series data from 1976 to 2010. The study used augmented dickey fuller test for stationarity with zero lag and one lag. The data showed stationarity at one lag. The vector auto regression is used for the analysis taking log production as dependent variable and lag-log production, lag-log rice price and lag-log competitive crop price as independent variable. The results are significant (p < 0.05). The short and long run elasticity estimated are 0.597 and 1.481 for production, 0.037 and 0.091 for price and −0.066 and −0.163 for competitive crop (maize) showing inelastic relation of production with lag production, lag price and lag competitive crop price except lag production in long run. The study recommends that the prices should be kept stabilized by the government so that the farmers can easily take their decision regarding allocation of land to a specific crop. For the use of modern technology loans should be disbursed to the farmers with reasonable interest rate. The farmers should be properly educated through extension workers so that they are able to adopt new technology and increase productivity. Keywords: Rice, Supply response, Agriculture, Productivity, Pakistan