ABSTRACT
This chapter describes a part of the overall model, and focuses on the determination of output and prices in the agricultural sector. It presents the price formation equations that were estimated for the agricultural sub-sectors. Agricultural output has been modelled in the empirical studies in two ways: direct estimation of a production function that relates agricultural output to core input levels and through a production function that is implicit in the optimizing behaviour of the producers. The divergence of a producer-level production function from the potential technical production frontier, is a measure of technical inefficiency. The production function provides an approach to the decomposition of growth in output in terms of input growth and traditionally, technical progress or a shift in production function. Cropping intensity, or the ratio of gross crop area to the net crop area, is a function of conditions for crop production.
