The supply elasticity for North Sumatera shallot in short and long-run

Abstract

Shallot is one of the horticultural commodities, which its instability can cause inflation. Government policies often pay more attention to reducing prices to prevent inflation, so that the consumers' welfare finally increases, while producers' welfare is still less accommodated by the policies. North Sumatera is one of the major shallot producing provinces in Indonesia, and it includes in the recommended areas for expanding shallot cultivation areas. This study analysed the factors affecting the supply of North Sumatera shallot and estimated its elasticity to the price in order to help formulating agricultural policies relating to the stabilization of the North Sumatera shallot supply. To estimate it, the Nerlove partial adjustment model, the autoregressive model, was analysed by multiple linear regression with the Ordinary Least Square (OLS) estimation technique. The results showed that the North Sumatera shallot supply was positively affected by the shallot harvest area, the shallot cultivation area, the garlic producer price, and the TSP fertilizer price. In addition, it was also negatively affected by the shallot producer price and the North Sumatera shallot supply in the previous period. In both the short and long-run, North Sumatera shallot supply is inelastic to the price.