The supply response of cocoa farmers to economic, social and other variables in Trinidad and Tobago. (223)
Keywords:Elasticity, unit root, cocoa, Nerlovian model, supply response
AbstractA major problem that has faced the cocoa industry in Trinidad and Tobago has been a large decline in cocoa beans exported, from approximately 6,213 tonnes in 1970 to 517 tonnes in 2009, despite continuous rises in price over the same period. This research paper presents an analysis of the supply response of the cocoa farmers to prices and other variables. The analysis utilized a modified Nerlovian model (logarithmic form) after statistical tests were conducted to establish if the time series data is stationary over the years 1969-2009. Other statistical test results determined that the regression model met the classical assumptions of Ordinary least Squares (OLS).The regression results indicated a short-run price elasticity of supply of 0.36 and a long run price elasticity of supply at 1.07. Other variables, which significantly determined the supply of cocoa, were the dry season rainfall lagged one year as well as the lagged wet season rainfall. Based on these results, recommendations were suggested to develop and expand cocoa output in Trinidad and Tobago. These included the long term benefits of increasing the price of cocoa paid to farmers and assisting farmers with the negative effects of above average rainfall on storage and disease incidence of this crop through extension advice and infrastructural modifications.