Dynamic input demand functions and resource adjustment for US agriculture: state evidence

The paper presents an econometric model of dynamic agricultural input demand functions that include research based technical change and autoregressive disturbances and fits the model to annual data lor a set of stale aggregates pooled over 1950-1982. The methodological approach is one of developing a theoretical foundation for a dynamic input demand system and accepting state aggreage behavior as approximated by nonlinear adjustment costs and long-term profit maximization. Although other studies have largely ignored autocorrelation m dynamic input demand systems, the results show shorter adjustment lags with autocorrelation than without. Dynamic input demand own-price elasticities for the six input groups are inelastic, ami the demand functions possess significant cross-price and research effects.     

Quadratic Differential Demand Systems and the Retail Demand for Pork in Great Britain

The primary objective of this paper is to derive a general synthetic quadratic (rank 3) differential demand system which nests within it a range of testable differential demand models including the quadratic AIDS, CBS, Rotterdam and NBR systems. A model selection test procedure is also outlined. These differential systems are then applied and tested to analyse the monthly retail demand for cuts of pork in Great Britain over the period 1989–2000. The empirical results suggest that a quadratic differential AIDS model is most appropriate for the pork demand system studied, but that the need for inclusion of quadratic income/expenditure terms is not universal for every cut within the demand system. Quadratic expenditure effects were appropriate for pork chops and leg roasts, but log linear expenditure effects were adequate for bellies, shoulders and loin roasts. Roasting cuts were expenditure and own price elastic, with pork loins, chops and bellies all expenditure and own price inelastic.     

The Use of Conditional Cost Functions to Generate Estimable Mixed Demand Systems

Mixed demand systems have been virtually ignored in empirical work solely because derivation of these systems requires closed forms for both direct and indirect utility functions. This article proposes the alternative of using a conditional cost function to generate empirical mixed demand models. This approach allows the estimation of mixed demand systems, which are explicit in an unobservable variable (utility), but may lack a closed form representation in terms of observable variables such as prices, quantities and expenditure. Results indicate that this approach is operationally feasible, which opens up a wider range of mixed demand specifications in static analyses.     

Forms of Scale Curves and Differential Inverse Demand Systems

This article provides a new interpretation of the scale effects in differential inverse demand systems. A scale curve is defined as a curve that shows how the expenditure share of a good or service changes as the consumption level changes. It is shown that Brown, Lee, and Seale's synthetic model has the same scale effects as do the Box–Cox scale curves. In this light, their model is not a mere composite but a model in its own right. An empirical illustration given for Japanese fresh food demand suggests that the underlying scale curves differ from both linear and loglinear forms.     

Alternative models of input allocation in multicrop systems: Irrigation water in the Central Plains,United States

This paper compares three models of input allocation in multicrop systems. In addition to the variable input and satisficing models analyzed in previous research, an allocatable fixed input model of short-run input use is derived. The empirical application studies irrigation water use in the Central Plains region of the United States. Based on results from model specification tests and prediction accuracy measures, the allocatable fixed input model dominates both other models in explaining multicrop water allocation. In addition, the paper presents an alternative approach to the study of deficient data on multicrop production. By transferring econometric results from analysis of ‘non-deficient’ crop-level data, input allocations in deficient data sets can be predicted.     

Modelling technical change in Italian agriculture: a latent variable approach

This paper presents an alternative approach to the measurement of technical change. It is based on the latent variable level of technology that enters explicitly the input demand system and on a hypothesis about the innovation generating process. By adding measurement error equations, the behavioral system can be viewed as a Multiple Indicators/Multiple Causes (MIMIC) model. The parameter estimates are obtained with a maximum likelihood estimator which involves the implicit covariance matrix. The analysis refers to Italian agriculture and the results provide some evidence on the nature and level of technical change during the years 1961–1991.     

Selection of Nonnested Demand Models

This paper applies the likelihood dominance criterion (LDC), a new method of model selection developed by Pollak and Wales (1991), to four popular demand equation systems, using a set of seasonally adjusted quarterly Canadian data series. the results indicate that the almost ideal demand system (AIDS) dominates various alternative demand systems. the LDC method is useful in assisting demand analysts in selecting the proper demand specification. the paper also includes tests for unit roots and cointegration and, based on these tests, an error corrections model is estimated and tested against the popular but not theoretically plausible linear approximate almost ideal demand system.     

Welfare Effects of Selected Food-grain Policies in India

Government's policy interventions in the market for food-grains affect supply as well as demand. In this paper, the welfare effects of certain food-grain policies are analysed while taking into account the interdependence of the various sectors in the economy. Adequate structure is built into the model in order to study the effects of a dual price structure on farmers' supply response, and also the effects of public distribution schemes on the aggregate demand for food-grains. Policy implications are derived by computing the market clearing prices and their movement under alternative assumptions regarding the nature of the market.     

PRODUCTION TECHNOLOGY AND INPUT ALLOCATIONS IN SRI LANKAN MULTICROP FARMING

A primal production analysis is conducted of 182 farm households producing multiple outputs in the Sri Lankan dry zone. The approach involves systems estimation of the production functions with first-order equations for variable inputs and permits recovery of the production technology for each crop. Land and family labour are regarded as constraining inputs. Shadow prices are computed for the constraining inputs and yield important implications for increasing household profits. Evidence of global homotheticity in a subset of three inputs is found for three of the crops. Weak separability is rejected in all tested subsets except for fertiliser and chemicals used in the production of vegetables. Input demand elasticities are computed for allocations satisfying necessary and sufficient conditions for profit maximisation. Highly elastic conditional input demands and output supplies are implied.     

Efficiency of Cooperatives and Investor Owned Firms Revisited

The objectives of dairy processing cooperatives differ from those of investor‐owned firms (IOFs). However, the literature usually assumes the same performance measures for cooperatives vis‐a‐vis IOFs. This study compares the performance of dairy cooperatives and IOFs in major European dairy producing countries. A traditional input oriented approach is used and two alternative approaches are used to account for the differential objectives of cooperatives. Cooperatives’ performance differs across the two approaches from being outperformed by IOFs using the input oriented approach to outperforming them when using an approach that is more in line with cooperatives’ objectives.     

A Nonparametric Test of the Traditional Travel Cost Model

The traditional travel cost model operates on the assumption that choices are made regarding the number of trips to various sites over an entire recreation season. This paper uses actual recreation data to test the consistency of this model with postulates of rational economic choice as embodied in the axioms of revealed preference. The paper assumes consumer rationality and examines the effects of alternative trip prices and model structures on the degree of consistency between them and the axioms of choice. Using tests developed by Varian and Tsur, the authors find that site choices at prices proxied by travel costs for most individuals in the sample violate the axioms. The violations are quite large when time costs, both in traveling and on-site, are omitted from the prices. When they are included, violations are almost as numerous, but not as large. The paper also examines demand heterogeneity by stratifying the sample and repeating the nonparametric tests. These findings suggest caution be used in interpreting welfare measures derived from traditional travel cost models, especially those that do not include measures of time value. The authors' approach provides a method for screening travel cost data and preparing for model selection and estimation.     

Decompositions of corn price effects: implications for feed grain demand and livestock supply

This article examines how corn prices affect the demand for feed grains and the supply of livestock outputs. The differential approach to the theory of the multiproduct firm is employed to examine ex ante decisions about feed grain demand and livestock supply. The estimation results suggest that livestock producers have little flexibility in adjusting the demand for corn in response to an increase in corn prices. The substitutable relationship between corn and distillers’ grains contributes to alleviating pressures on feed costs in response to high corn prices. In addition, the estimation results highlight that the composition of livestock supply can be altered by changes in livestock prices. On the basis of the estimated elasticities, the decompositions of profit‐maximizing input demand are conducted to examine the effects of changes in corn prices on feed grain demand and livestock supply. The decomposition results reveal that an increase in corn prices reduces corn demand but raises the demand for distillers’ grains mainly due to the substitution effects of corn price changes. The decomposition results also show that an increase in the price of corn reduces cattle supply but raises the supply of chicken and pork due to the output relationships in supply.     

Quarterly Demands for Meat in Canada with Alternative Seasonality Hypotheses

It is common practice to use ordinary least squares with seasonal dummies in linear regression analysis of seasonally unadjusted time series data. The approach is based on a hypothesis of fixed and constant shifts in the intercept for each of the quarters (Jorgenson). This method is expensive in terms of potential multicollinearity problems and degrees of freedom (Green and Doll; Ladd; Madalla 1977). Also, the hypothesis that the quarterly effects are fixed may be overly restrictive, especially if the dummy variables are included simply to support the estimation of a structural relationship from the pooled quarterly sample partitions.
This paper presents results on the structure of consumer demand for meats in Canada. These results, while of interest for their implications on the structure of consumer demand, are intended primarily to illustrate the consequences of alternative seasonality hypotheses. The sample is for the twelve year period, 1965 through 1976. Linear demand relationships are estimated using a number of alternative methods for accommodating seasonal effects. Results for the demand models with the alternative seasonality hypotheses are quite different, implying that researchers should exercise care in selecting a representation for seasonality that is consistent with the process generating the data, the theory, and the institutional setting governing the population from which the sample is drawn.     

ALTERNATIVE DEFINITIONS OF DEMAND FOR RECREATIONAL ANGLING IN NORTHERN IRELAND

The effects of three alternative definitions of demand on estimated parameters are explored in a travel-cost study of aggregate demand for recreational angling in Northern Ireland in 1988. Functions are estimated using individual visits and zonal visitation rates for the number of visits and the number of visitors as alternative demand definitions. The approach using individual visits was found to be the more satisfactory in statistical terms and in relation to estimates of user benefits when compared with a parallel contingency valuation study. It is judged to be the more appropriate approach where there is a well defined and quantifiable user group. However, the modelling of income and substitutes in the functions proved to be unsatisfactory, perhaps due to inadequate specification and measurement of these variables.     

A Dynamic Adjustment Model for U.S. Agriculture: 1948-79

A multioutput model is developed within the adjustment cost framework to analyze the structure of dynamic adjustments in U.S. agriculture during the post-war period. An important feature of this model is that the econometric model is consistent with dynamic economic theory. Fluctuations in capital stocks, variable inputs, and outputs are explained by changing opportunity costs. Empirical results indicated that durable equipment, farm-produced durables, and family labor exhibited significant rigidity in adjustment as a response to exogenous shocks. Surprisingly, the hypothesis that real estate was a variable input could not be rejected. The univariate flexible accelerator hypothesis, which is widely maintained in most agricultural adjustment studies, is inconsistent with the data.     

A MODEL OF THE DISAGGREGATED DEMAND FOR MEAT IN AUSTRALIA

The focus of this study is the estimation of the Australian demand for meat between 1967 and 1990, employing a demand systems approach which uses the linear approximate, almost ideal demand system (LA/AIDS) model. Two demand systems are estimated by maximum likelihood methods, one for aggregate types of meat and one for disaggregated meat products. After correcting for serial correlation in the two demand systems, restrictions from utility theory are imposed and tested for their appropriateness. By using a new data set on the Australian retail price and consumption offresh pork, ham and bacon, the results from the disaggregated model provide the first estimates of the own-price, cross-price and expenditure elasticities for these commodities.     

The novelty of simple and known technologies and the rhythm of farmer-centred innovation in family dairy farming in Brazil

Family dairy farming is under threat from the expansion of the sugarcane economy in south-eastern Brazil. This paper analyses an intervention programme which aimed to intensify dairy production and make family dairy farming sustainable in this competitive context. The case study of the ‘Balde Cheio’ Programme (Full Bucket) can be seen as an alternative method of knowledge generation to that of the dominant research approach which prioritizes cutting-edge technologies. This paper characterizes this farmer-oriented innovation programme for dairy farming systems, in which research, development and extension are seen as a long-term learning process. It analyses how the programme has been adapted to fit the diversity of situations found amongst farmers and to heterogeneous production conditions. The study relates the circulation of knowledge, the search for innovation by recombining apparently simple and known technologies, the use of experiments on the farm and the adaptation of the rhythm of innovation to the specific situation of the farm as the critical issues to achieve sustainable production systems.     

Efficient Estimation of Hedonic Inverse Input Demand Systems

This article is concerned with efficient estimation of characteristics demand. We derive and estimate an inverse input demand system for quality characteristics by using 172,946 observations over 881 trading days in the Icelandic fish auctions. An improved estimation method based on an expanded random coefficient model is suggested as an alternative to the currently used two-stage method of Brown and Rosen . The estimates demonstrate the improved efficiency of the suggested method. A number of empirical results emerge, including a general increase in the demand for quality.     

Demand for meat and dairy products by Turkish households: a Bayesian censored system approach

We extend the Tobit (censored) linear equation system procedure to utility‐theoretic demand functions, along with a mapping mechanism to impose the adding‐up restriction implied by consumer utility maximization theory—a theoretical restriction very often ignored in previous empirical studies with censored demand systems. In this context, the Bayesian Markov Chain Monte Carlo (MCMC) procedure is applied to the censored linear approximate almost ideal demand system (LAIDS) for 12 food products, using data from the Turkish Household Expenditure Survey. All own‐price elasticities are negative and expenditure elasticities positive. Uncompensated own‐price elasticities for rural households are generally much higher than those for their urban peers, though demand for most food products are own‐price elastic for both types of households. The differential patterns in demand elasticities between urban and rural households become even more evident (almost twice) as relatively more expensive foodstuffs are consumed, showing that accessibilities to alternative products have made rural Turkish households more cognizant toward price changes in foods. Household characteristics play a key role in food expenditures, notably so in urban areas, and regional and seasonal differences are also present.     

Compensated optimal response under uncertainty in agricultural household models

This study derives the qualitative properties of a household's optimal consumption, family labour, hired labour and non-labour input choices under price and/or output risk through a Slutsky-type compensation without imposing any restriction on risk preference structure or production technology. These compensated responses provide the underpinning for welfare analysis in agricultural household models under risk. The framework for the evaluation of welfare effects of product and factor price interventions in a setting of output and price risk is developed. The paper also outlines an empirical model for estimation of the compensated demand and supply responses and for validation of the paper's analytical results.