Data sources Estimated parameters and elasticities

D. Poonyth et al. Agricultural Economics 22 2000 233–245 237 Table 2 Estimated parameters for area harvested equations a Constant AH t − 1 Incentive price Quota quantity CP price Trend R 2 DH Belgium 14.814 0.415 0.035 0.453 – – 0.94 0.238 4.88 2.64 6.63 Denmark 14.148 0.633 0.045 0.153 – – 0.96 1.422 764 1.96 4.39 France 50.895 0.320 2.987 0.664 − 3.325 – 0.95 0.621 2.27 6.53 2.140 −1.32 Germany 71.696 0.492 3.042 0.321 − 7.098 – 0.99 0.893 8.36 6.46 5.97 −3.51 The Netherlands 48.048 0.440 0.483 0.162 – – 0.65 0.864 2.56 1.84 1.98 Spain 23.003 0.649 0.048 – – – 0.71 1.562 2.05 1.83 UK 21.797 0.663 3.677 0.200 − 7.238 – 0.94 1.243 4.36 1.89 1.96 −1.94 Italy 33.376 0.369 0.016 – – – 0.70 0.200 1.80 2.21 Ireland 13.219 0.576 0.136 – – – 0.91 1.388 5.26 1.56 Austria 17.169 0.603 0.079 – – – 0.77 1.366 4.12 2.86 Finland 2.753 0.723 0.040 – – 2.117 0.81 1.346 3.34 1.78 2.05 Sweden 10.034 0.447 0.043 – – 5.600 0.92 1.036 3.88 1.68 2.05 a Constant=intercept; AH t − 1 = area harvested in previous year; Incentive Price=price of sugar weighted average of A-, B-, and C-sugar prices in Ireland, UK, and Italy; C-sugar price in all other countries; Quota Quantity=allocated A-+B-sugar production quota; CP Price=competing crop wheat price; DH-Durbin H statistic. In parentheses are t-statistics.

4. Data sources

Data for area harvested, beet production, sugar production, and sugar content were provided by two institutions, the Confederation Internationale des Bettraviers Europeen and the Comite Europeen des Fabricant de Sucres. Consumption, stocks, imports, exports, production, quota, and policy prices, as well as consumption prices and world sugar prices the Paris spot market price, are from Eurostat’s Agricul- tural Statistical Yearbook 3 . Eurostat also provided the price statistics for competing crops and green rates 4 . Market exchange rates, income and price measures, wage rate indices, and population statistics are from 3 Eurostat. Agricultural Statistical Yearbook. Office for Official Publication of the European Communities, Luxemburg various years. 4 Eurostat. Agricultural Prices. Office for Official Publication of the European Communities, Luxemburg various years. International Financial Statistics , an International Monetary Fund publication. The data are adjusted to reflect the crop year by weighting calendar year data. Policy prices are converted to local currency using green rates. World sugar prices were converted to lo- cal currency using market exchange rates. Sugar data are expressed in terms of refined equivalent. Germany from 1990 onward includes the former East Germany.

5. Estimated parameters and elasticities

The equations in the model are estimated us- ing the 2SLS estimation technique for the period 19761977–19961997. Table 2 reports the estimated parameters and the relevant statistics for area har- vested equations. All equations are expressed as linear functions. The estimated equations in the model were subjected to a range of statistical tests. Based on the results of these statistical tests, it can be concluded 238 D. Poonyth et al. Agricultural Economics 22 2000 233–245 that the estimated econometric model provides reli- able estimates of EU sugar supply and utilization. For example, most of the root mean square RMS percent errors for both static and dynamic simulations are less than 3, whereas for the new entrants Spain, Austria, Finland and Sweden the RMS percent errors are between 2 and 8. The Thiel U statistics are in the range of 0.006 to 0.038. The fit of most of the area harvested equations as measured by R 2 is above 0.80, the exception being The Netherlands and Italy where estimated R 2 are 0.65 and 0.70, respectively. The estimated coefficients associated with allocated sugar quota transformed to hectarage are smaller than one between 0.16 and 0.67, implying that a 1 ha change in the area-equivalent of sugar quota affects harvested area by less than 1 ha. This is consistent with the hypothesis that some producers are responding to the quota at the margin, while others are responding to the C-sugar price, even within a given country. In the cases of France, Germany, and the UK, wheat was found to be the competing crop. C-sugar forms the ma- jor share of the ending stocks of sugar in the European Union. Since C-sugar receives the world price, ending stocks are influenced by the world price of sugar as well as C-sugar production. A reduced form equation can be used to determine the world sugar price as a function of EU sugar net exports, Table 3 Estimated supply elasticities a World price Average price Quota quantity CP price SR LR SR LR SR LR SR LR Belgium 0.040 0.069 – – 0.416 0.703 – – Denmark 0.018 0.050 – – 0.140 0.388 – – France 0.155 0.228 – – 0.541 0.794 − 0.130 − 0.200 Germany 0.050 0.098 – – 0.336 0.663 − 0.075 − 0.148 The Netherlands 0.029 0.052 – – 0.141 0.252 – – Spain 0.115 0.336 – – – – – – Austria 0.087 0.220 – – – – – – Finland 0.028 0.100 – – – – – – Sweden 0.021 0.038 – – – – – – UK – – 0.088 0.263 0.185 0.548 − 0.057 − 0.148 Italy – – 0.592 0.832 – – – – Ireland – – 0.020 0.047 – – – – a Average Price=weighted average of A-, B-, and C-sugar prices; Quota Quantity=allocated A-+B-sugar production quota; CP Price=competing crop wheat price; SR=short run; LR=long run. LOGWPS = −1.0 × LOGEUEXPT − EUIMP + 0.46 × LOGEUEXPT − EUIMP t − 1 where WPS is the world price of sugar, EUEXPT represents total EU sugar exports, and EUIMP repre- sents total EU sugar imports. The parameters are de- rived from FAPRI’s world sugar model. The short-run flexibility is negative one and the long-run flexibility is approximately half that of the short-run, reflecting EU sugar export demand elasticities that are approx- imately twice as large in the long run as in the short run. Both short-run and long-run EU supply elasticities are less than one Table 3. In countries where the world price is the incentive price, short-run supply elasticities with respect to the world price are between 0.01 and 0.16, whereas long-run elasticities range between 0.03 and 0.34. In countries responding to average sugar prices, the short-run and long-run sup- ply elasticities with respect to the average of A-, B-, and C-sugar prices are between 0.02 and 0.83. The estimated short-run supply elasticities with respect to the production quotas for Belgium, Denmark, France, Germany, The Netherlands, and UK are between 0.14 and 0.54, whereas the long run elasticities are between 0.25 and 0.79. As stated earlier, wheat was found to be a competing crop in France, Germany, and the UK. The short-run cross-price supply elas- D. Poonyth et al. Agricultural Economics 22 2000 233–245 239 Table 4 Demand and price transmission elasticities Retail price Income World price Intervention price Domestic consumption − 0.304 0.710 – – Ending stocks – – − 0.361 – Retail price – – – 0.812 ticities range from−0.06 to−0.13, whereas long-run elasticities fall between −0.15 and −0.20. Previous studies such as those of Graham 1983, Wong et al. 1989, Leuck and Neff 1991, Devadoss and Kropf 1996 estimated long run supply elasticities in the range of 0.1–2, whereas Ball et al. 1993 estimated short run elasticities in the range of 0.1–1.6. The computed income elasticity of demand for sugar in the European Union is 0.71 and the own-price elasticity of demand is −0.30 Table 4. Wong et al. 1989 estimated a demand price elasticity of −0.32 and an income elasticity of 0.26, while Devadoss and Kropf 1996 estimated an income elasticity of 0.30 but did not report an own-price elasticity.

6. Implication of WTO limits