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Measurement of Returns to Fixed Factors on North Carolina Dairy Farms

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  • Ganoza, Victor G.
  • King, Richard A.

Abstract

A common method used to measure the returns to fixed factors on dairy farms is a residual approach in which all but one of the fixed factors,are valued at current market prices and any remaining income is taken as the return to that factor. When using this method it often is found that the returns to the residual factor is negative, which implies that some or all 0f the returns to fixed factors are below current market values. This report presents the findings of experiments with several statistical models that allow simultaneous estimation of the contribution of each factor to variable profit defined as the difference between cash income and cash expenses adjusted for inventory change. The assumptions of each model are described and the mathematical relationships among the models are summarized. Empirical estimates are calculated fora set of dairy farms in North Carolina for the year 1982.

Suggested Citation

  • Ganoza, Victor G. & King, Richard A., 1988. "Measurement of Returns to Fixed Factors on North Carolina Dairy Farms," Department of Economics and Business - Archive 259750, North Carolina State University, Department of Economics.
    • Handle: RePEc:ags:ncbuar:259750
    DOI: 10.22004/ag.econ.259750
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    References listed on IDEAS

    as
    1. Philip Garcia & Steven T. Sonka & Man Sik Yoo, 1982. "Farm Size, Tenure, and Economic Efficiency in a Sample of Illinois Grain Farms," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 64(1), pages 119-123.
    2. King, Richard A. & Benson, Geoffrey A. & Ganoza, Victor G., 1984. "North Carolina Dairy Farming, 1983," Department of Economics and Business - Archive 259561, North Carolina State University, Department of Economics.
    3. Diewert, W. E., 1973. "Functional forms for profit and transformation functions," Journal of Economic Theory, Elsevier, vol. 6(3), pages 284-316, June.
    4. Berndt, Ernst R & Khaled, Mohammed S, 1979. "Parametric Productivity Measurement and Choice among Flexible Functional Forms," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1220-1245, December.
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