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Multi-input Multi-output Farm-level Cost Function: A Comparison of Least Squares and Entropy Estimators

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  • Polome, Philippe
  • Fernagut, Bruno
  • Harmignie, Olivier
  • Frahan, Bruno Henry de

Abstract

We introduce a modification of the quadratic-Leontieff multi-output cost function that is particularly suitable for the data of the Farm Accountancy Data Network. We present least squares and entropy estimates of that function and compare their results for a sample of crop farms. Our results are encouraging for the use of entropy estimators in cases in which farms are not assumed to share the same technology. Our approach can be seen as an extension of the Positive Mathematical Programming approach (Howitt, 1995). The extension consists in an explicit specification of inputs in the cost function and in the possibility of modeling several farms simultaneously.

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Bibliographic Info

Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24727.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24727

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Related research

Keywords: cost function; least squares estimator; entropy estimator; heterogeneity; Farm Management; C3; D61; Q12;

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  1. Thomas Heckelei & Hendrik Wolff, 2003. "Estimation of constrained optimisation models for agricultural supply analysis based on generalised maximum entropy," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 30(1), pages 27-50, March.
  2. Golan, Amos & Judge, George G. & Miller, Douglas, 1996. "Maximum Entropy Econometrics," Staff General Research Papers 1488, Iowa State University, Department of Economics.
  3. Quirino Paris & Richard E. Howitt, 1998. "An Analysis of Ill-Posed Production Problems Using Maximum Entropy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(1), pages 124-138.
  4. Wolfgang Britz & Thomas Heckelei & Hendrik Wolff, 2003. "Symmetric Positive Equilibrium Problem: A Framework for Rationalizing Economic Behavior with Limited Information: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 1078-1081.
  5. Sckokai, Paolo & Moro, Daniele, 2002. "Modelling The Cap Arable Crop Regime Under Uncertainty," 2002 Annual meeting, July 28-31, Long Beach, CA 19860, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  6. Quirino Paris, 2001. "Symmetric Positive Equilibrium Problem: A Framework for Rationalizing Economic Behavior with Limited Information," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 1049-1061.
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