Supply Response of Tobacco Output to Price Changes in Zimbabwe (1980 to 2015)

The main objective of the study was to estimate the responsiveness of tobacco supply to change in prices in Zimbabwe. Historical time series data from 1980 to 2015 and the OLS approach were used in order to achieve the stated objective. The study followed the adapted ARDL Nerlove (1958) logarithmic supply response model also used by Leaver (2004). All variables except for short-run technological improvements and sales quotas were found to be statistically significant. Supply of tobacco in Zimbabwe was found to be positively influenced by expected tobacco prices, population of active tobacco growers and by technological advances in the longrun and inversely affected by previous tobacco quantities and expected maize prices. The shortrun and long-run price elasticities of tobacco supply of 0.12 and 0.16 were estimated, indicating that tobacco output is unresponsive to changes in output prices. Therefore, the hypothesis that tobacco output respond to price changes in Zimbabwe may be rejected. Given the findings, the study recommended for price supporting instruments such as input, credit and mechanization policies for effective growth in the production and supply of tobacco in Zimbabwe.