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Estimation Of Supply And Demand Elasticities Of California Commodities

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  • Russo, Carlo
  • Green, Richard D.
  • Howitt, Richard E.

Abstract

The primary purpose of this paper is to provide updated estimates of domestic own-price, cross-price and income elasticities of demand and estimated price elasticities of supply for various California commodities. Flexible functional forms including the Box-Cox specification and the nonlinear almost ideal demand system are estimated and bootstrap standard errors obtained. Partial adjustment models are used to model the supply side. These models provide good approximations in which to obtain elasticity estimates. The six commodities selected represent some of the highest valued crops in California. The commodities are: almonds, walnuts, alfalfa, cotton, rice, and tomatoes (fresh and processed). All of the estimated own-price demand elasticities are inelastic and, in general, the income elasticities are all less than one. On the supply side, all the short-run price elasticities are inelastic. The long-run price elasticities are all greater than their short-run counterparts. The long-run price supply elasticities for cotton, almonds, and alfalfa are elastic, i.e., greater than one. Policy makers can use these estimates to measure the changes in welfare of consumers and producers with respect to changes in policies and economic variables.

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Bibliographic Info

Paper provided by University of California, Davis, Department of Agricultural and Resource Economics in its series Working Papers with number 37629.

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Date of creation: 26 Jun 2008
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Handle: RePEc:ags:ucdavw:37629

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Related research

Keywords: Consumer Economics: Empirical Analysis; Agricultural Markets and Marketing; Agriculture: Aggregate Supply and Demand Analysis; Prices; Agribusiness; Agricultural and Food Policy; Consumer/Household Economics; Crop Production/Industries; Demand and Price Analysis; Marketing; D120; Q130; Q110;

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Cited by:
  1. Garnache, Cloe & Merel, Pierre R., 2012. "Carbon market policy design: Investigating the role of payments aggregation," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124960, Agricultural and Applied Economics Association.
  2. Seale, James L. Jr. & Zhang, Lisha & Traboulsi, Mohamad R., 2013. "U.S. Import Demand and Supply Response for Fresh Tomatoes, Cantaloupes, Onions, Oranges, and Spinach," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 45(03), August.
  3. Josué Medellín-Azuara & Richard Howitt & Duncan MacEwan & Jay Lund, 2011. "Economic impacts of climate-related changes to California agriculture," Climatic Change, Springer, vol. 109(1), pages 387-405, December.

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