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Estimation of Area Elasticities from a Standard Profit Function

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  • Carlos Arnade
  • David Kelch

Abstract

This article demonstrates that both crop area and output elasticities can be calculated from a profit function. A Chambers/Just profit function (which includes land allocations as quasi-fixed factors) is used to derive shadow price equations for each crop area allocation. Jointly solving these shadow price equations for crop area makes it possible to calculate individual crop area elasticities. A profit function is specified to represent agricultural producers in the state of Iowa. Shadow price equations are jointly estimated with output supply and input demand equations. From these estimated equations, we derive the individual crop area response and output response to a change in prices. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01004.x
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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 89 (2007)
Issue (Month): 3 ()
Pages: 727-737

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Handle: RePEc:oup:ajagec:v:89:y:2007:i:3:p:727-737

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Cited by:
  1. Boere, Esther & Peerlings, Jack H.M. & Reinhard, Stijn & Kuhlman, Tom & Heijman, Wim J.M., 2012. "Effects of volatile output prices on agricultural land-use change," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122472, European Association of Agricultural Economists.
  2. Vincent Martinet, 2012. "Effect of soil heterogeneity on the welfare economics of biofuel policies," Working Papers 2012/01, INRA, Economie Publique.
  3. Vincent Martinet, 2010. "Soil heterogeneity, agricultural supply and land-use change: an application to biofuels production," Working Papers 2010/05, INRA, Economie Publique.
  4. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.
  5. Hongli Feng & Bruce A. Babcock, 2008. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," Center for Agricultural and Rural Development (CARD) Publications 08-wp472, Center for Agricultural and Rural Development (CARD) at Iowa State University.
  6. Lee, Young-Jae & Kennedy, P. Lynn, 2013. "The Role Of Uncertainty In The Agricultural Output Market In Acreage Allocation Decisions," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142130, Southern Agricultural Economics Association.
  7. Ian Bateman & Georgina Mace & Carlo Fezzi & Giles Atkinson & Kerry Turner, 2011. "Economic Analysis for Ecosystem Service Assessments," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 48(2), pages 177-218, February.
  8. Briones, Roehlano M., 2011. "Multimarket Modeling of Agricultural Supply when Crop Land Is a Quasi-fixed Input: A Note," Discussion Papers DP 2011-29, Philippine Institute for Development Studies.
  9. Bento, Antonio M. & Klotz, Richard & Landry, Joel R., 2011. "Are there Carbon Savings from US Biofuel Policies? Accounting for Leakage in Land and Fuel Markets," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104008, Agricultural and Applied Economics Association.
  10. Fezzi, Carlo & Bateman, Ian J., 2009. "Structural Agricultural Land Use Modelling," 2009 Conference, August 16-22, 2009, Beijing, China 51423, International Association of Agricultural Economists.
  11. Lee, Young-Jae & Kennedy, P. Lynn, 2008. "An Analysis As To The Causal Relationship Between Bioethanol Expansion And Agricultural Crop Acreage Allocation In The United States," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6343, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  12. Haile, Mekbib G. & Kalkuhl, Matthias & von Braun, Joachim, 2013. "Short-term global crop acreage response to international food prices and implications of volatility," Discussion Papers 145308, University of Bonn, Center for Development Research (ZEF).

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