Error correction models and agricultural supply response

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Abstract
This paper explores the relevance of the error correction specification to agricultural supply modelling. The theoretical basis of the model is outlined, and it is shown how the familiar partial adjustment model is a restrictive special case. In particular it is shown how the error 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 good empirical results, and is preferred in specification tests to the partial adjustment model. It is concluded that the error correction model provides a superior alternative to the partial adjustment model on both theoretical and empirical grounds.

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