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Adjustment costs and dynamic factor demands for U.S. cigarette manufacturing

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  • Rezitis, Anthony N.
  • Brown, A. Blake
  • Foster, William E.

Abstract

Following the approach of Berndt, Fuss, and Waverman, a dynamic model for U.S. cigarette manufacturing is developed and factor demands estimated. Tobacco and capital stocks are treated as quasi-fixed inputs. The results indicate that there are significant adjustment costs associated with adjusting tobacco stocks, but not with adjusting the capital stock. Short-run, intermediate-run, and long-run output constant elasticities are estimated for inputs in cigarette production. Demand for U.S. tobacco by U.S. cigarette manufacturers is found be more inelastic than shown by previous studies using static models. Cigarettes produced for export appear to differ in their marginal cost of production from cigarettes produced for the sale in the U.S. market. © 1998 Elsevier Science B.V. All rights reserved.

Suggested Citation

  • Rezitis, Anthony N. & Brown, A. Blake & Foster, William E., 1998. "Adjustment costs and dynamic factor demands for U.S. cigarette manufacturing," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 18(3), May.
  • Handle: RePEc:ags:iaaeaj:174408
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    References listed on IDEAS

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    Cited by:

    1. Brown, A. Blake & Snell, William M. & Tiller, Kelly, 1999. "The Changing Political Environment For Tobacco -- Implications For Southern Tobacco Farmers, Rural Economies, Taxpayers, And Consumers," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(02), August.
    2. Beghin, John C. & Blake Brown, A. & Hasyim Zaini, M., 1997. "Impact of domestic content requirement on the US tobacco and cigarette industries," Agricultural Economics, Blackwell, vol. 15(3), pages 201-212, January.
    3. Brown, A. Blake & Martin, Laura L., 1996. "Price Versus Quota Reductions: U.S. Flue-Cured Tobacco Policy," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 28(02), December.

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