Macroeconomic Trends and Factors of Production Affecting Potato Producer Price in Developing Countries

Salmensuu, Olli (2017): Macroeconomic Trends and Factors of Production Affecting Potato Producer Price in Developing Countries. Published in: The Journal of Developing Areas , Vol. 55, No. 1 (2021): pp. 91-105.

Abstract

Principal component analysis is performed on 33 mainly agriculture related social variables of 40 developing countries. Important components are also put to explain potato producer price. The analysis reveals that the data set contains macroeconomic trends; economic growth, growing importance of the potato and improving infrastructures for the market economy. Although the coefficients for these trends in affecting potato producer price are not statistically significant, it is noteworthy that their signs are in line with observations from earlier research. Economic growth and increasing potato importance are often accompanied with potato price rising in developing countries, whereas improving infrastructures increase availability of food with lower average prices. Potato producer price is statistically significantly affected by four factors of production: land, labour, capital and technology. Relating potato supply constraints of earlier survey literature to principal component interpretation also revealed primary paths how these macroeconomic inputs are being formed in developing countries. Potato suitability allows more cultivated land and greater production with lower price. Agricultural poverty brings limited alternatives and poor terms of trade for farmers, with abundant labour at low wage rate leading to low potato producer price. Better alternative business lowers capital inflow to agricultural land development, entailing low production and high price. Knowledge increases productivity lowering price. *** This is a working paper for the article published by the Journal of Developing Areas. Published version: https://doi.org/10.1353/jda.2021.0008 *** Its free full-text download: http://urn.fi/URN:ISBN:978-952-61-3823-7

• Item Type: MPRA Paper
• Language: English
• Keywords: Principal components, Economic growth, Developing countries, Supply constraints, Factors of production, Agricultural development
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q11 - Aggregate Supply and Demand Analysis ; Prices; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q18 - Agricultural Policy ; Food Policy; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R51 - Finance in Urban and Rural Economies; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R5 - Regional Government Analysis > R58 - Regional Development Planning and Policy; Z - Other Special Topics > Z1 - Cultural Economics ; Economic Sociology ; Economic Anthropology > Z12 - Religion

References

Acemoglu, D., Johnson, S., and Robinson, J. A. (2001). "The colonial origins of comparative development: An empirical investigation." American Economic Review, 91(5), 1369-1401.

Acemoglu, D., Johnson, S., and Robinson, J. A. (2002). "Reversal of fortune: Geography and institutions in the making of the modern world income distribution." Quarterly Journal of Economics, 117(4), 1231-1294.

Antazena, I., Fabian, A., Freund, S., Gehrke, E., Glimmann, G., and Seher, S. (2005). "Poverty in potato producing communities in the central highlands of Peru." German Agency for Technical Cooperation (GTZ) and Centro Internacional de la Papa (CIP).

BenYishay, A., and Grosjean, P. (2014). "Initial endowments and economic reform in 27 post-socialist countries." Journal of Comparative Economics, 42(4), 892-906.

Dahl, D. B. (2014). xtable: Export tables to LaTeX or HTML. R package version 1.7-3.

Everitt, B., and Hothorn, T. (2011). An Introduction to Applied Multivariate Analysis with R: Use R! LLC: Springer Science+Business Media, DOI 10.1007/978-1-4419-9650-3.

Fuglie, K. O. (2007). "\Priorities for potato research in developing countries: Results of a survey." American Journal of Potato Research, 84(5), 353-365.

Gebru, H., Mohammed, A., Dechassa, N., and Belew, D. (2017). "Assessment of production practices of smallholder potato (Solanum tuberosum L.) farmers in Wolaita zone, southern Ethiopia." Agriculture & Food Security, 6(1).

Goodwin, H., Jr., Fuller, S. W., Capps, O., Jr., and Asgill, O. W. (1988). "Factors affecting fresh potato price in selected terminal markets." Western Journal of Agricultural Economics, 13(2), 233-243.

Greene, W. H. (1993). Econometric Analysis. New York: MacMillan Publishing Company, 2nd edn.

Hausman, D. M. (1992). The inexact and separate science of economics. Cambridge: Cambridge University Press.

Hope, R. L. (2003). "Paying in potatoes; community-based health insurance for the rural and informal sector." Lancet, 362 (9386), 827-829.

Horton, D. (1980). The Potato as a Food Crop for the Developing World. Lima, Peru: International Potato Center, Social Science Department Working Paper Series No. 1980-6.

Horton, D. (1987). Potatoes: Production, Marketing and Programs for Developing Countries. Boulder: Westview Press.

Lal, B., Sinha, T. K., Anil, K., Pandit, A., and Pandey, N. (2011). "Constraints perceived by the farmers in adoption of potato technology." Potato Journal, 38(1), 73-77.

Landreth, H., and Colander, D. C. (1989). History of economic theory. Boston: Houghton Miffin, 2nd edn.

López-Guzmán, T., Borges, O., Hernández-Merino, M., and Cerezo, J. M. (2013). "Tourism in Cape Verde: an analysis from the perspective of demand." Tourism Economics, 19(3), 675-688.

Maldonado, L., Wright, J., and Scott, G. (1998). "Constraints to production and use of potato in Asia." American Journal of Potato Research, 75(2), 71-79.

Massy, W. F. (1965). "Principal Components Regression in Exploratory Statistical Research." Journal of the American Statistical Association, 60(309), 234{-256.

McNeill, W. H. (1999). "How the potato changed the world's history." Social Research, 66(1), 67-83.

Minten, B., Reardon, T., Singh, K. M., and Sutradhar, R. (2014). "The new and changing roles of cold storages in the potato supply chain in Bihar." Economic & Political Weekly, XLIX(52).

Morshed, A. M. (2007). "Is there really a "border effect"?" Journal of International Money and Finance, 26(7), 1229-1238.

Nunn, N., and Qian, N. (2011). "The potato's contribution to population and urbanization: Evidence from a historical experiment." Quarterly Journal of Economics, 126(2), 593-650.

Nyairo, N. M. (2011). Impact of Agricultural Market Liberalization on Food Security in developing countries: a Comparative Study of Kenya and Zambia. University of Helsinki, Department of Economics and Management Publication Nr. 50, Agricultural Policy.

Pusateri, F. P. (1958). "What factors influence the price of potatoes." American Potato Journal, 35(8), 633-641.

R Core Team (2014). R: A Language and Environment for Statistical Computing. R Foundation for Statistical Computing, Vienna, Austria.

Rahman, S., Kazal, M. M. H., Begum, I. A., and Alam, M. J. (2016). "Competitiveness, profitability, input demand and output supply of maize production in Bangladesh." Agriculture, 6(2).

Rämö, M. (2016). Polkupyörällä Himalajalle. Helsinki: Minerva Kustannus Oy.

Reardon, T., Chen, K., Minten, B., and Ardiano, L. (2012). The Quiet Revolution in Staple Food Value Chains: Enter the Dragon, the Elephant, and the Tiger. Mandaluyong City, Philippines: Asian Development Bank and International Food Policy Research Institute.

Rhoades, R. E. (2001). A fantastic voyage. In The Potato Treasure of the Andes: From Agriculture to Culture, ed. by C. Graves. Lima: International Potato Center.

Salaman, R. N. (1987). The History and Social Influence of the Potato. Cambridge University Press, revised impression ed. by J. G. Hawkes.

Scott, G. (2002). "Maps, models, and muddles: world trends and patterns in potato revisited." Potato Research, 45(1), 45-77.

Sen, A. K. (1981). Poverty and Famines: an Essay on Entitlement and Deprivation. Oxford: Clarendon Press.

Smith, A. (1904). An Inquiry into the Nature and Causes of the Wealth of Nations. Library of Economics and Liberty, Edwin Cannan, ed., [originally published in 1776], available from http://www.econlib.org/library/Smith/smWN9.html; accessed 26 October 2015.

Thomas, R. L. (1997). Modern Econometrics: An Introduction. Harlow, England: Addison Wesley Longman.

Upadhya, M. D. (1979). "Potential for potato production from true seed under developing country conditions." In Report of the planning conference on the production of potatoes from true seed, International Potato Center.

Westerlund, J., and Urbain, J.-P. (2013). "On the implementation and use of factor-augmented regressions in panel data." Journal of Asian Economics, 28, 3-11, ACAES-FEG Special Issue: Econometrics of Financial Markets in Asia.

Westerlund, J., and Urbain, J.-P. (2015). "Cross-sectional averages versus principal components." Journal of Econometrics, 185(2), 372-377.

Zhang, X., and Hu, D. (2014). "Overcoming successive bottlenecks: The evolution of a potato cluster in China." World Development, 63, 102-112.