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.

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.

• 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

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