ERROR CORRECTION MODELS AND AGRICULTURAL SUPPLY RESPONSE

This paper explores the relevance of the error correction specificatio n to agricultural supply modelling. The theoretical basis of the model is outlined, and it is shown how the familiar partial adjustment mode l is a restrictive special case. In particular it is shown how the err or correction model avoids the partial adjustment model's unrealistic assumption of a fixed target supply based on stationary expectations. In an analysis of UK pig supply an error correction model provides goo d empirical results, and is preferred in specification tests to the pa rtial adjustment model. It is concluded that the error correction mode l provides a superior alternative to the partial adjustment model on b oth theoretical and empirical grounds.