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

Olli Salmensuu

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Principal components; Economic growth; Developing countries; Supply constraints; Factors of production; Agricultural development (search for similar items in EconPapers)
JEL-codes: Q11 Q18 R51 R58 Z12 (search for similar items in EconPapers)
Date: 2017-05-16
New Economics Papers: this item is included in nep-agr
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https://mpra.ub.uni-muenchen.de/109462/1/MPRA_paper_109462.pdf revised version (application/pdf)

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