Disaggregated Output Supply and Pesticide Policy

Multi-stage optimization estimates of agricultural output supply and input demand relationships are reported for three major Midwestern agricultural states. The full matrix of own- and cross-price elasticities are computed for 7–10 individual crops, 6–7 livestock products, 5 variable inputs, and residual categories in each state. The impact of an ad valorem tax on pesticides is examined. Output supplies and input demands are estimated to be inelastic in nearly all variables. Although the systems of supply and demand equations for each state are estimated independently of other states, there is considerable similarity across states in a number of the elasticities (but not in pesticide demands).