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Factor Market Incidence of Agricultural Trade Liberalization: Some Additional Results

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  • Hertel, Thomas

Abstract

This paper develops four propositions pertinent to an assessment of the factor market incidence of an exogenous shock to farm prices, such as is expected to follow global agricultural trade liberalization. The analysis highlights the usefulness of the Morishima elasticities of substitution in addressing this question. For example, it is shown that, in the case of two groups of fixed factors, the relative incidence of an exogenous product price shock depends entirely on the Morishima elasticities of substitution between these two input groups. These results are also extended to cover instances where there is a shock to either fixed factor availability (e.g., the release of Idled acreage) or to variable input costs (e.g., feed prices). Finally an expression for the subsequent change in real, farm household income is developed. The paper concludes with a discussion of some implications for future research.

Suggested Citation

  • Hertel, Thomas, 1991. "Factor Market Incidence of Agricultural Trade Liberalization: Some Additional Results," Impact Project Archive 295066, Impact Research Centre, University of Melbourne.
    • Handle: RePEc:ags:ircipa:295066
    DOI: 10.22004/ag.econ.295066
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    References listed on IDEAS

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    1. Blackorby, Charles & Russell, R Robert, 1989. "Will the Real Elasticity of Substitution Please Stand Up? (A Comparison of the Allen/Uzawa and Morishima Elasticities)," American Economic Review, American Economic Association, vol. 79(4), pages 882-888, September.
    2. Lawrence, Denis, 1990. "A Generalised McFadden Cost Function for Australian Agriculture," 1990 Conference (34th), February 13-15, 1990, Brisbane, Australia 145195, Australian Agricultural and Resource Economics Society.
    3. Thomas W. Hertel, 1989. "Negotiating Reductions in Agricultural Support: Implications of Technology and Factor Mobility," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(3), pages 559-573.
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