Estimating supply response of multiproduct farms

V. Eldon Ball
1989 unpublished
o o-si £2 Multiproduct Farm| cf-V. Eldon Ball ro') r-1 : J -< ABSTRACT This report estimates supply response of multiproduct farms and statistically tests assumptions traditionally maintained in supply response studies. In particular, the report focuses on the degree to which input and output decisions may be aggregated, or are jointly determined, and their responsiveness to changes in relative prices. The null hypothesis of weak separability, which ensures the existence of aggregate output
more » ... e and quantity indexes that satisfy the addingup property, is rejected. Therefore, all agricultural outputs should not be collapsed into a single index and used as an argument in empirical studies. The null hypothesis that the technology is nonjoint, or that each output is produced according to a single-output production function, is also rejected. This is consistent with the anecdotal observation of multiproduct farms. If input and output decisions are jointly made, then careful consideration should be given to policies that may be directed at a single output. Specifically, the empirical results suggest that such policies may affect all production decisions, not only those made regarding the commodity targeted by the policy. A more encompassing approach to agricultural policy analysis is implied.
doi:10.22004/ag.econ.312295 fatcat:evf37bcfy5g6hbyyznqxkj4kbu