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The Structure of Production and Investment in Australia's Pastoral Zone

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  • Agbola, Frank W.

Abstract

This paper develops a dynamic optimal intertemporal investment model under the adjustment cost hypothesis to analyse the structure of production and investment in Australia's pastoral zone. The dynamic model is applied to pooled cross-sectional and time-series data obtained from ABARE farm surveys for the period 1979 through to 1993. Empirical results provide strong statistical evidence to indicate that quasi-fixity of inputs of labour, capital, sheep numbers and cattle numbers are characteristic of the agricultural sector in the pastoral zone. The results reveal that it takes about two years for labour, a little over three years of capital, a little over two years for sheep flock inventory and cattle herd inventory to adjust toward their long-run optimal levels. Results indicate substitution between labour-capital and sheep-cattle input pairs. The results also indicate that output supply and input demand responses are price inelastic in both the short and long run.

Suggested Citation

  • Agbola, Frank W., 1999. "The Structure of Production and Investment in Australia's Pastoral Zone," 1999 Conference (43th), January 20-22, 1999, Christchurch, New Zealand 122327, Australian Agricultural and Resource Economics Society.
  • Handle: RePEc:ags:aare99:122327
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    File URL: http://purl.umn.edu/122327
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    References listed on IDEAS

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    1. Vincent, David P., 1977. "Factor Substitution In Australian Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 21(02), August.
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    13. J. Fernandez-Cornejo & C. M. Gempesaw II & J. G. Elterich & S. E. Stefanou, 1992. "Dynamic Measures of Scope and Scale Economies: An Application to German Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(2), pages 329-342.
    14. Wayne H. Howard & C. Richard Shumway, 1989. "Technical Change and Applications of Dynamic Duality to Agriculture: Reply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 805-805.
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    Cited by:

    1. Mounter, Stuart W. & Griffith, Garry R. & Piggott, Roley R. & Fleming, Euan M. & Zhao, Xueyan, 2008. "An Equilibrium Displacement Model of the Australian Sheep and Wool Industries," Research Reports 37663, New South Wales Department of Primary Industries Research Economists.

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