ACREAGE RESPONSE OF FLUE CURED VIRGINIA TOBACCO IN KHYBER PAKHTUNKHWA.

This study investigates the acreage response of Flue Cured Virginia (FCV) tobacco to its own price and area under maize crop in three major FCV producing districts of Khyber Pakhtunkhwa i.e., Swabi, Mardan, and Charsadda. Data used in the study cover time series data for 1971-2011. The newly developed Auto Regressive Distributed Lag (ARDL) model for cointegration was used to estimate the short-run and long-run elasticities. The study found a long-run price elasticity of 0.33, thereby revealing that FCV acreage response to its own price is relatively inelastic. The short-run acreage response was also low (0.13) and therefore relatively inelastic. This implies that price policy could not be used as the sole instrument to affect area under FCV. The provision of some other non-price incentives may also play a significant role in increasing area under FCV in the study area. The results also show that area under maize crop negatively affect area under FCV, thereby indicating that maize crop could be considered as competing crop to FCV in the study area. The results of this study could help policy makers in identifying important determinants of acreage response of FCV tobacco crop in the study area. [ABSTRACT FROM AUTHOR]