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An Analysis As To The Causal Relationship Between Bioethanol Expansion And Agricultural Crop Acreage Allocation In The United States

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  • Lee, Young-Jae
  • Kennedy, P. Lynn
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    Abstract

    This study analyzes the historical price response of individual crop acreage in order to determine the impacts of an expansionist policy in bioethanol production on the U.S. agricultural industry. In doing this, this study provides an economic foundation by using a traditional Rotterdam model to simulate a cropland demand system. Within the developed framework, this study estimates own and cross acreage elasticities and scale elasticities to show the impacts of acreage values on crop production and the relationship between total cropland and individual crop acreage. This study found that rice farming is most inelastic to own acreage value. Soybeans, hay, and wheat are shown to be good substitute crops for corn. Corn, soybeans, hay, wheat, cotton, barley, and rice are shown to have positive scale elasticity, while sorghum and oats are shown to have negative scale elasticities. The scale effects of corn, soybeans, hay, and wheat are relatively large, while those of cotton, sorghum, barley, rice, and oats are relatively small.

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    Bibliographic Info

    Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida with number 6343.

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    Date of creation: 2008
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    Handle: RePEc:ags:aaea08:6343

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    Related research

    Keywords: bioethanol; acreage value; Rotterdam model; own acreage elasticity; cross acreage elasticity; scale elasticity; Crop Production/Industries; Resource /Energy Economics and Policy;

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    1. Carlos Arnade & David Kelch, 2007. "Estimation of Area Elasticities from a Standard Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 727-737.
    2. Torre Ugarte, Daniel de la & English, Burton C. & Jensen, Kimberly L., 2007. "Sixty Billion Gallons by 2030: Economic and Agricultural Impacts of Ethanol and Biodiesel Expansion," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9709, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Moschini, GianCarlo & Moro, D. & Green, Richard D., 1994. "Maintaining and Testing Separability in Demand Systems," Staff General Research Papers 11247, Iowa State University, Department of Economics.
    4. Lewbel, Arthur, 1996. "Aggregation without Separability: A Generalized Composite Commodity Theorem," American Economic Review, American Economic Association, vol. 86(3), pages 524-43, June.
    5. K. D. Meilke & R. E. Kramar, 1976. "Acreage Response In Ontario," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 24(1), pages 51-66, 02.
    6. Barten, Anton P, 1993. "Consumer Allocation Models: Choice of Functional Form," Empirical Economics, Springer, vol. 18(1), pages 129-58.
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