Farmers’ Heterogeneous Responses to Price Variations: Identification of Dairy Farms Flexibility based on a Panel Smooth Transition

Elodie Letort () and Fabienne Femenia
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Elodie Letort: SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - INSTITUT AGRO Agrocampus Ouest - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement

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Abstract: We propose a model of farm input use decisions that accounts for the potential existence of adjustment costs incurred by farmers when adjusting their variable inputs in response to price variations. This model allows characterizing the heterogeneity in the short run flexibility of farms. It is estimated on a sample of dairy farms located in the West of France. Our estimation procedure relies on a panel smooth transition regression approach, which we adapt to account for the specificities of our sample. The estimation results show non-linear responses of dairy farmers' acreages and feed input use decisions to input and output prices, suggesting the existence of input adjustment costs. Our results also reveal an heterogeneity of adjustment costs among farms which translates into an heterogeneity in their degree of reaction to large price variations, the more flexible farms being generally less indebted and showing better environmental performances than the sample average.

Keywords: Livestock production decisions; Farm flexbility; Panel smooth transition regression (search for similar items in EconPapers)
Date: 2021-07-20
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Published in XVI EAAE Virtual Congress, Jul 2021, Prague, Czech Republic

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03339112

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