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A Revenue-Function Approach to the Measurement of Output-Substitution Possibilities in Agriculture

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  • Gordon, Daniel V

Abstract

The purpose of this article is to calculate Hicksian and Marshallian estimates of output-substitution possibilities in an agricultural industry. The Hicksian elasticities or net substitution possibilities are measured within a revenue-maximizing framework holding input levels constant. The Marshallian elasticities that encompass both net substitution and expansion effects are measured within a profit-maximizing framework allowing both output and input levels to vary. The results are empirically reasonable and consistent with the duality theory for revenue and profit maximizing behavior. A notable empirical result is that, in the very short run or market period with input levels held constant, there exits considerable scope for changing the output composition between crops and cattle on cattle farms.

Suggested Citation

  • Gordon, Daniel V, 1989. "A Revenue-Function Approach to the Measurement of Output-Substitution Possibilities in Agriculture," Journal of Business & Economic Statistics, American Statistical Association, vol. 7(4), pages 483-487, October.
    • Handle: RePEc:bes:jnlbes:v:7:y:1989:i:4:p:483-87
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    Cited by:

    1. Assaf, A. George & Gillen, David & Barros, Carlos, 2012. "Performance assessment of UK airports: Evidence from a Bayesian dynamic frontier model," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(3), pages 603-615.
    2. Frank Asche, 2009. "Adjustment Cost and Supply Response in a Fishery: A Dynamic Revenue Function," Land Economics, University of Wisconsin Press, vol. 85(1), pages 201-215.
    3. Rakotoarisoa, M.A. & Randriamamonjy, J., 2018. "Assessing Agricultural Policy for Targeted Reforms in Sub-Saharan Africa," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277309, International Association of Agricultural Economists.
    4. Rakotoarisoa, Manitra A., 2013. "Effects of a Mix of Taxes and Subsidies on the Mix of Products: Substitution vs. Endowment Effects Applied to the Agricultural Sector in Sub-Saharan Africa," Conference papers 332423, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.

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