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

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

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‐tixed 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.

Suggested Citation

  • Anthony N. Rezitis & A. Blake Brown & William E. Foster, 1998. "Adjustment costs and dynamic factor demands for U.S. cigarette manufacturing," Agricultural Economics, International Association of Agricultural Economists, vol. 18(3), pages 217-231, May.
    • Handle: RePEc:bla:agecon:v:18:y:1998:i:3:p:217-231
    DOI: 10.1111/j.1574-0862.1998.tb00501.x
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    Cited by:

    1. A. Blake Brown & Randal R. Rucker & Walter N. Thurman, 2007. "The End of the Federal Tobacco Program: Economic Impacts of the Deregulation of U.S. Tobacco Production," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(4), pages 635-655.
    2. Appelbaum, Elie, 1979. "Testing price taking behavior," Journal of Econometrics, Elsevier, vol. 9(3), pages 283-294, February.
    3. 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(2), pages 1-18, August.
    4. 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(2), pages 1-8, December.
    5. John C. Beghin & A. Blake Brown & M. Hasyim Zaini, 1997. "Impact of domestic content requirement on the US tobacco and cigarette industries," Agricultural Economics, International Association of Agricultural Economists, vol. 15(3), pages 201-212, January.

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