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Farm Level Nonparametric Analysis of Profit Maximization Behavior with Measurement Error

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  • Zereyesus, Yacob Abrehe
  • Featherstone, Allen M.
  • Langemeier, Michael R.

Abstract

This paper tests the farm level profit maximization hypothesis using a nonparametric production analysis approach allowing for measurement error in the input and output variables. All farms violated Varian’s deterministic Weak Axiom of Profit Maximization (WAPM). The magnitude of minimum critical standard errors required for consistency with profit maximization, convex technology production was smaller after allowing technological change during the sample period. Results indicate strong support for the presence of technological change during the sample period.

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  • Zereyesus, Yacob Abrehe & Featherstone, Allen M. & Langemeier, Michael R., 2009. "Farm Level Nonparametric Analysis of Profit Maximization Behavior with Measurement Error," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46829, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saeana:46829
    DOI: 10.22004/ag.econ.46829
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    References listed on IDEAS

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