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Working Paper Series Economic Development. Econometrics ...

Working Paper Series Economic Development. Econometrics ... Guisán, M.C y Expósito, P. Demand and Supply of Agriculture in Spain, France, Japan and USA We can notice that OECD accounted for more than 40% of total income of table 2 in 1985 and a little more than 25% in year 2000. These figures imply important changes in international markets of Agriculture, and show that real income from Agriculture is very difficult to increase in spite of increases in the quantities of production. China and India had in the past very low levels of production per inhabitant in this sector and now they have increased substantially those levels but it seems difficult also for them to get further increases in real income from Agriculture even if they increase quantities in the future. As a consequence of the fall in international relative prices of Agriculture, and the stagnation of real income of Agriculture, employment has decreased as we can see in table 3, for the period 1950-2000. Agrarian employment in 17 OECD countries has fallen during that period from 49.4 million workers to 13.5. In China the decrease has been from 78.4 million workers to 45.0, and in India the number of agrarian workers has increased from 116.1 million to 263.7. The rates of agrarian employment per one thousand inhabitants have dropped from 95 to 17 in OECD, and have diminished from 326 to 272 in China and from 324 to 260 in India. Table 3. Agrarian employment and rates of agrarian employment (thousand workers and workers per one thousand inhabitants) Employment Rate of employment Year OECD17 India China OECD17 India China 1950 49481 116198 78484 95 324 326 2000 13542 263691 45046 17 260 272 Source: Elaboration by Guisan and Exposito(2004 b) from OECD, World Bank(2003) and other international Statistics In Guisan and Exposito(2002) we present an econometric model for agrarian employment in OECD countries and in Guisan and Exposito(2004 b) we estimated models for agrarian employment in India, China and a pool of both countries after testing the homogeneity of coefficients between both countries. All these studies show that real income of Agriculture has a positive influence on agrarian employment while the increase in nonagrarian employments has usually a negative influence on agrarian employment because it gives workers opportunities for best paid jobs outside the farming sector. 2. Production and Price Equations with a recursive and system. Here we present a summary of the results of previous studies for production and prices of Agriculture in four OECD countries, in order to make a comparison with the results of the next section corresponding to an interdependent system. Data correspond to four OECD countries: the USA, Japan, France and Spaing during the period 1967-99, where QA, real valued added of Agricultures is expressed in billion dollars at 1990 prices and purchasing power parities, QNA is real valued added of Non- 4 Guisán, M.C y Expósito, P. Demand and Supply of Agriculture in Spain, France, Japan and USA Agrarian activities, and IPRA is the ratio between the price index of valued-added in Agriculture and the index of private consumption prices. The letter L at the beginning of the name of a variable means natural logarithm and the D(y) means increase, or first difference, in the variable y. TI is time and variables D9 and DU73 are dummies for some special years. Table 4. LS Production equation, Individual regressions and Pool of 4 countries 1967-99 Country LQA(-1) D(LIPRA(-1)) D(LQA(-1)) D(LQNA(-1)) R 2 %SE DW 1.1 France 1.005 (444) 0.434 (2.18) -0.301 (-1,85) -0,538 (-0.85) 0.92 0.55 1.98 1.2 Japan 0.999 (705) 0.301 (1.62) -0.295 (-1.66) 0.180 (0.69) 0.47 0.44 1.94 1.3 Spain 1.000 (434) 0.155 (0.72) -0.171 (-0.89) 0.444 (0.91) 0.74 0.65 2.24 1.4 USA 1.001 (457) -0.067 (-0.52) -0.341 (-1.96) 0.790 (1.11) 0.95 0.62 2.20 1.5 Pool 1.002 (1102) 0.106 (1.35) -0.238 (-2.74) 0.108 (0.51) 0.99 0.58 2.08 Source: Guisan and Exposito(2002). Table 5. LS Price equation, Individual regressions and Pool of 4 countries 1967-99 Country D(LQA) LIPRA(-1) D(LQNA) TI D9 DU73 R 2 %SE DW 2.1 France -0.104 0.868 1.953 -0.003 0.98 0.33 1.88 (-0.74) (25.15) (4.07) (-5.24) 2.2 Japan -0.157 0.768 0.789 -0.001 0.92 0.55 1.83 (-1.00) (9.99) (3.22) (-3.38) 2.3 Spain -0.319 0.911 0.985 -0.002 0.97 0.28 2.33 (-2.15) (25.18) (2.46) (-3.74) 2.4 USA -0.233 0.92 1.803 -0.003 0.355 0.95 0.34 2.24 (-1.20) (23.48) 2.85) (-3.34) (4.22) 2.5 Pool -0.233 0.91 0.834 -0.002 0.394 0.96 0.37 2.01 (-2.87) (50.77) (4.9) (-6.73) (6.66) Source: Guisan and Exposito(2004 a). The pooled equation satisfy the condition of homogeneity of coefficients among the four countries and seem very interesting, with high goodness of fit and significant parameters. In the next section we compare the results of Model 1, the recursive system, with Model 2, and interdependent one, and we conclude that the bilateral relation between QA and IPRA seems to be lagged in the supply equation so the recursive system seems to be better. 3.- TSLS estimation of an interdependent system of production and prices of Agriculture. The model estimated here by Two Stages Least Squares, TSLS, consists of 2 interdependent equations where Agriculture real production has a contemporaneous bilateral relation between QA and IPRA. This model was estimated by TSLS, and includes equations 3 and 4. Equations 3.1, and 3.2 are two estimations of the equation of Agriculture production supply. The first was estimated by TSLS without White´s correction for heteroskedasticity 5

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