Role of price and non price factors in cotton production in Tanzania.

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Date
2004
Journal Title
Journal ISSN
Volume Title
Publisher
University of Dar es Salaam
Abstract
Agriculture has played a key role in the Tanzanian economy through export earnings and provision of intermediate inputs to support the manufacturing sector. The economy is dependent on agriculture, which contributes about 50 percent of the GDP. The economy performed poorly from the late 1970s, this was mainly attributed due to an unstable agricultural sector and inefficient industrial service. Tanzania's traditional crops are coffee, cotton, cashew nuts, tea, sisal and tobacco. Cotton is the second most important cash crop after coffee and it has occupied this position since mid 1970's. The objective of the study was to investigate on the influence of price and non price factors in cotton production in Tanzania before and during liberalization of export crops. The Nerlovian partial adjustment model was used to investigate the response of cotton output to price and non price factors. Time series data from 1970 to 2002 were used run the regressions. Price factors such as own producer price and competing producer price, and non price factors such as lagged output, rainfall, research investment, time trend were used as independent variables and the regressor was cotton output. The study employs the Ordinary Least Square (OLS) method to assess the relative importance of each regressor, judged on the basis of economic, statistical and econometric criteria. Regressions results showed that cotton output is positively influenced by own producer price and competing producer price, and non-price factors such as lagged output, rainfall, and research investment. In additional the chow test results suggests absence of a structural change following economic liberalization, however the results must be interpreted with caution because the interval since market liberalization of cotton industry is too short for all changes to attain their next equilibrium level. However getting price right is a necessary condition but not a sufficient to induce supply response. In the absence of other supporting non-price factors and good policies, price alone is alone seldom sufficient to bring about the desired changes in the agricultural sector. Therefore there is a need to strengthen other policy incentives other than price. The role of extension services and education, agricultural research and development, agricultural credit, technology, and infrastructure are therefore emphasized.
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Keywords
Agricultural prices, Farm income, Cotton, Economic aspects, Tanzania economy
Citation
Kisonga, T. E. (2004). Role of price and non price factors in cotton production in Tanzania. Masters dissertation, University of Dar es Salaam. Available at (http://41.86.178.3/internetserver3.1.2/detail.aspx)