This paper explores the economics of input decision by a firm facing production uncertainty. It relies on a state-contingent approach to production uncertainty. First, the paper develops a methodology to specify and estimate cost-minimizing input decisions under a state-contingent technology. Second, the analysis is applied to time series data on US agriculture. It finds strong empirical evidence that, in the analysis of input choices, expected output alone does not provide an appropriate representation of production uncertainty. The results provide empirical support for an output-cubical technology. This indicates that an ex post analysis of stochastic technology (as commonly found in previous research) appears appropriate. The analysis also provides evidence that the cost of facing adverse weather conditions has declined in US agriculture over the last few decades.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2006 Annual meeting, July 23-26, Long Beach, CA with number
21081.
Length: Date of creation: 2006 Date of revision: Handle: RePEc:ags:aaea06:21081
Contact details of provider: Postal: 555 East Wells Street, Suite 1100, Milwaukee, Wisconsin 53202 Phone: (414) 918-3190 Fax: (414) 276-3349 Email: Web page: http://www.aaea.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: (AgEcon Search).