How Responsive Is the Crop Yield To Producer Prices? a Panel Data Approach for the Case of Turkey

Abstract

The food crisis in 2008 clearly shows the importance of productivity in agriculture. This topic has recently become even more important since the countries are obliged to decrease their agricultural protection due to WTO rules which have an important effect on crop prices. As the global land area for agricultural production remains fixed, it is important to investigate how responsive productivity is to price changes. In this study, price responsiveness of yield is investigated by using balanced panel data from 15 provinces in Turkey. The results from a fixed effects model that controls for unobserved heterogeneity indicate that the relative prices of wheat to barley and wheat to fertilizer are important factors to determine productivity. The coefficients for the price of other crops as well as price of inputs, and average April and May rainfall are also found to be significant determinants of productivity.