Examining crop price effects on production decision and resource allocation: an ex-ante approach

Dong Hee Suh and Charles Moss

Applied Economics, 2018, vol. 50, issue 26, 2909-2919

Abstract: This article examines the output price effects on the US crop production, employing an ex-ante approach to the differential systems of input demand and output supply. The estimation results of the differential input demand show that the expansion of crop production leads to an increase in acreage (i.e. extensive margin) and a proportional rise in input usage improving yield per acre (i.e. intensive margin). The substitutable relationship between fertilizer and land supports that crop producers have an option to choose either intensive or extensive margin in response to changes in their relative prices. In addition, the estimation results of the differential output supply highlight that the composition of crop supply can be altered by changes in ex-ante crop prices. The estimation results suggest that crop producers substitute corn supply for the supply of cotton, wheat and soybeans or vice versa. Based on the estimated elasticities, the decompositions of profit-maximizing input demand are conducted, which reveals that a change in ex-ante crop prices is associated closely with resource reallocation.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/00036846.2017.1412077 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:50:y:2018:i:26:p:2909-2919

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036846.2017.1412077

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().