Modeling Supply Response with Implicit Revenue Functions: A Policy-Switching Procedure for Rice

Dean T. Chen and Shoichi Ito

American Journal of Agricultural Economics, 1992, vol. 74, issue 1, 186-196

Abstract: An econometric method of estimating implicit revenue with a policy switching mechanism is proposed for supply response analysis. The model develops important linkages between farm program instruments and commodity market equilibrium and allows evaluation of supply response decisions under conditions of major policy shifts. The econometric procedure developed here is applied to the U.S. rice sector to determine program compliance/noncompliance decisions under three alternative rice program periods. A change in farm prices was found to affect significantly producers' net returns and participation rate. Results indicate price impacts on acreage planted are inelastic for program participants but elastic for nonparticipants.

Date: 1992
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:74:y:1992:i:1:p:186-196.

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