Wheat supply response in Greece and the European Union policy

Abstract

This paper attempts to estimate the supply response for wheat production in Greek agriculture. In our analysis we use the rigorous cointegration and the error correction method, as it is superior to the generally used Nerlovian partial-adjustment model. Since wheat is one of the most important commodities in the Greek agriculture, comprising 26 percent of the total cultivated land, the estimation of its price responsiveness is vitally important in supporting agricultural policy decisions. The results of our analysis reveal that there is a long-term stable relationship between the supplied quantity of wheat and real gross revenue of wheat producers, suggesting that in order to raise wheat yield and farmer incomes, considering the European Union agricultural policy, productivity increases play a vital role. The government’s policy should therefore be channelled through measures that will encourage productivity increases.