Estimation of Supply Response of Livestock Products: The Case of Kajiado District
Volume 5, Issue 1, February 2016, Pages: 8-14
Received: Aug. 5, 2015; Accepted: Aug. 12, 2015; Published: Feb. 25, 2016
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Manyeki John Kibara, Section of Socioeconomics and Biometric, Kenya Agricultural and Livestock Research Organization, Arid and Rangeland Research Institute - Kiboko, Makindu, Kenya
Ruigu George, School of Economics, University of Nairobi, Nairobi, Kenya
Mumma Gerald, School of Economics, University of Nairobi, Nairobi, Kenya
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During early 1970s and early 1980s economic conditions in general had been favourable for the Kenyan farm sector. Following market liberalization in the late 1980s, farmers and in particular livestock farmers experienced economic hardship. The economic situation facing livestock industry was characterized by wide fluctuation and unpredictability of the livestock and livestock product prices and uncertainity in livestock production and marketing. These shocks coupled with economic conditions in the livestock sector rendered profit-oriented decision-making by livestock farmers and other participants in the industry difficult. The objective of this study was therefore to estimate the livestock products supply responses using an error correction method. The estimators of the model were derived by way of regression and correlation after subjecting the data collected to vigorous testing for stationarity using Augmented Dick-Fuller test. Conclusions were made on the basis of R2 (coefficient of determination) as well as the t statistic. The results indicate that the estimated short run supply function, live cattle and cattle hides were price elastic while sheep and goats were inelastic. The long run supply response was positive although inelastic for live cattle and goats while cattle hide was elastic. The results also showed positive short run price elasticity. On the basis of t-value, the findings were conclusive with all the variables analyzed being statistically significant. The study also found that live cattle and cattle hide supply adjust to equilibrium levels quite fast. These results suggest that livestock farmers in the study area adjust their supply quiet early, probably as soon as they gain the slightest indications that the market signal would be permanent.
Error Correction Model, Livestock Products, Long Run, Short Run, Price Elasticity, Supply Response
To cite this article
Manyeki John Kibara, Ruigu George, Mumma Gerald, Estimation of Supply Response of Livestock Products: The Case of Kajiado District, Economics. Vol. 5, No. 1, 2016, pp. 8-14. doi: 10.11648/
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