Input Substitution and the Distribution of Surplus Gains from Lower U.S. Beef-Processing Costs

John D. Mullen, Michael Wohlgenant () and Donald E. Farris

American Journal of Agricultural Economics, 1988, vol. 70, issue 2, 245-254

Abstract: Analysis of a switch from boxed beef to tray-ready beef processing demonstrates that limited substitution between farm and nonfarm inputs has a significant impact on the distribution of surplus gains. A two-input, two-output (beef and by-products) industry model was specified. Technical change was modeled as a shift in marketing input supply. This approach yields equivalent results to a demand increase from biased technical change. Using an estimated elasticity of substitution of 0.1 and parameter values from previous studies, the results indicate cattle producers would receive either 57% or 72% of surplus gains depending upon whether input substitution occurs.

Date: 1988
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