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Estimation of Area Elasticities from a Standard Profit Function

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  • Carlos Arnade
  • David Kelch

Abstract

This article demonstrates that both crop area and output elasticities can be calculated from a profit function. A Chambers/Just profit function (which includes land allocations as quasi-fixed factors) is used to derive shadow price equations for each crop area allocation. Jointly solving these shadow price equations for crop area makes it possible to calculate individual crop area elasticities. A profit function is specified to represent agricultural producers in the state of Iowa. Shadow price equations are jointly estimated with output supply and input demand equations. From these estimated equations, we derive the individual crop area response and output response to a change in prices. Copyright 2007, Oxford University Press.

Suggested Citation

  • Carlos Arnade & David Kelch, 2007. "Estimation of Area Elasticities from a Standard Profit Function," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 727-737.
  • Handle: RePEc:oup:ajagec:v:89:y:2007:i:3:p:727-737
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.01004.x
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    Cited by:

    1. Vincent Martinet, 2012. "Effect of soil heterogeneity on the welfare economics of biofuel policies," Working Papers 2012/01, INRA, Economie Publique.
    2. Hongli Feng & Bruce A. Babcock, 2010. "Impacts of Ethanol on Planted Acreage in Market Equilibrium," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 789-802.
    3. Briones, Roehlano M., 2016. "Embedding the AMPLE in a CGE Model to Analyze Intersectoral and Economy-Wide Policy Issues," Discussion Papers DP 2016-38, Philippine Institute for Development Studies.
    4. Wyatt Thompson & Joe Dewbre & Patrick Westfhoff & Kateryna Schroeder & Simone Pieralli & Ignacio Perez Dominguez, 2017. "Introducing medium-and long-term productivity responses in Aglink-Cosimo," JRC Working Papers JRC105738, Joint Research Centre (Seville site).
    5. Haile, Mekbib G. & Kalkuhl, Matthias & von Braun, Joachim, 2013. "Short-term global crop acreage response to international food prices and implications of volatility," Discussion Papers 145308, University of Bonn, Center for Development Research (ZEF).
    6. Sung, Jae-hoon & Miranowski, John A., 2015. "Adaptive Behavior of U.S. Farms to Climate and Risk," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205787, Agricultural and Applied Economics Association;Western Agricultural Economics Association.
    7. Rosburg, Alicia Sue, 2012. "Essays concerning the cellulosic biofuel industry," ISU General Staff Papers 201201010800003732, Iowa State University, Department of Economics.
    8. Chen, Qiu & Mirzabaev, Alisher, 2016. "Evaluating the Impacts of Traditional Biomass Energy Use on Agricultural Production in Sichuan, China," Discussion Papers 250213, University of Bonn, Center for Development Research (ZEF).
    9. Lee, Young-Jae & Kennedy, P. Lynn, 2013. "The Role Of Uncertainty In The Agricultural Output Market In Acreage Allocation Decisions," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142130, Southern Agricultural Economics Association.
    10. Kropp, Jaclyn, 2015. "Potential Distortionary Effects of Relocating Generic Base Acres," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196855, Southern Agricultural Economics Association.
    11. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "Inter-and intra-annual global crop acreage response to prices and price risk," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149695, Agricultural and Applied Economics Association.
    12. Vincent Martinet, 2010. "Soil heterogeneity, agricultural supply and land-use change: an application to biofuels production," Working Papers 2010/05, INRA, Economie Publique.
    13. Marita Laukkanen & Céline Nauges, 2014. "Evaluating Greening Farm Policies: A Structural Model for Assessing Agri-environmental Subsidies," Land Economics, University of Wisconsin Press, vol. 90(3), pages 458-481.
    14. Briones, Roehlano M., 2011. "Multimarket Modeling of Agricultural Supply when Crop Land Is a Quasi-fixed Input: A Note," Discussion Papers DP 2011-29, Philippine Institute for Development Studies.
    15. Bento, Antonio M. & Klotz, Richard & Landry, Joel R., 2011. "Are there Carbon Savings from US Biofuel Policies? Accounting for Leakage in Land and Fuel Markets," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 104008, Agricultural and Applied Economics Association.
    16. Fezzi, Carlo & Bateman, Ian J., 2009. "Structural Agricultural Land Use Modelling," 2009 Conference, August 16-22, 2009, Beijing, China 51423, International Association of Agricultural Economists.
    17. Lee, Young-Jae & Kennedy, P. Lynn, 2008. "An Analysis As To The Causal Relationship Between Bioethanol Expansion And Agricultural Crop Acreage Allocation In The United States," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6343, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Boere, Esther & Peerlings, Jack H.M. & Reinhard, Stijn & Kuhlman, Tom & Heijman, Wim J.M., 2012. "Effects of volatile output prices on agricultural land-use change," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122472, European Association of Agricultural Economists.
    19. Mekbib G. Haile & Matthias Kalkuhl & Joachim Braun, 2014. "Inter- and intra-seasonal crop acreage response to international food prices and implications of volatility," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 693-710, November.
    20. Haile, Mekbib G. & Kalkuhl, Matthias & Braun, Joachim von, 2013. "How does food supply respond to high and volatile international food prices? An empirical evaluation of inter- and intra- seasonal global crop acreage response," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161472, African Association of Agricultural Economists (AAAE).

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