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Role of Price on Replanting Decisions of Rubber: An
Application of Almon Lag Model
J. Edirisinghe and D. Perera *
ABSTRACT
Rubber is one of the major plantation crops cultivated
in Sri Lanka. It gives an environmental service apart from its economic
potential. To have a continuous supply of rubber, it is vital that the
balance between mature and immature rubber stands be maintained in the
long run. In order to do this, at least 3% of the total area
under rubber needs to be re-planted annually. However, in the recent
past, replanting as well as new planting has declined. One of the major
variables that affect the replanting decision by farmers is the price
of rubber. Hence, this study evaluated the role played by the lagged
price of rubber in replanting decision making. Almon lag model was
employed to data related to rubber prices from 1980 to 2004. A second
degree polynomial was found to be best in describing the data, as
expected. The maximum time lag was found to be eight years but a lag of
four years had the highest impact on the replanting decision. The paper
discusses the policy implications of the delayed response of replanting
to prices.
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* The authors are, respectively lecturer, and assistant lecturer Department
of Agribusiness Management Wayamba University of Sri Lanka Makandura
Gonawila-NWP Sri Lanka.
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Edirisinghe
and D. Perera 2005 Sri Lankan
Journal of
Agricultural Economics. Volume 7 (1). Pp. 21 - 31
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