C. Richard Shumway

Joint Estimation of Risk Preference Structure and Technology Using Expo-Power Utility

A method is developed to permit joint estimation of risk preference structure, degree of risk aversion, and production technology. The method is implemented using the Expo-Power utility function, which imposes no restrictions on risk preference structure. The empirical application uses data from a sample of Kansas wheat farmers. Evidence rejects the null hypothesis of risk neutrality and suggests that Kansas farmers exhibit decreasing absolute risk aversion and increasing relative risk aversion. Results also show that combined estimation of production function parameters with the utility function parameter is more efficient than is separate estimation of each.

Supply, Demand, and Technology in a Multiproduct Industry: Texas Field Crops

Technology, supply, and demand relationships among six Texas field crops and three variable inputs are investigated using a dual approach. Evidence of nonjoint production is found for wheat but not for other crops. Cotton, sorghum, and corn are homothetically separable. No larger groups of outputs nor any input groups satisfy the sufficient dual conditions for consistent aggregation and two-stage choice. Production is homothetic in outputs, fertilizer, and hired labor. Product supply and input demand equations are estimated. Estimates are inconsistent with expectations of the competitive model. The normalized profit function Hessian is not positive definite, and parameter symmetry is rejected.

Allocatable Fixed Inputs and Jointness in Agricultural Production: Implications for Economic Modeling

Allocatable fixed inputs, such as land, are a potentially important source of jointness in agriculture. As with other causes of jointness, they necessitate multiple-product systems for modeling product supply and input demand. In other important ways, however, their analytical implications are very different from other causes of jointness. Model specification differs. Demand functions for the quantities of each input used in the production of individual commodities can be derived if a primal approach is used, but such allocation equations cannot in general be identified from a dual specification. Available allocation data are not even useful in such dual estimations.

The Economics and Econometrics of Damage Control

Concern for the potentially harmful side effects of agricultural chemical inputs, especially pesticides, highlights the need to accurately determine the economic levels of their use. We consider three model specification issues: interaction of direct production inputs with damage control inputs in damage abatement, justification for a priori exclusion of production inputs from the abatement function, and the motivations and consequences of alternative stochastic specifications. Empirical analysis using farm-level data shows that misspecification of the stochastic element in the production function can overestimate the marginal physical productivity of pesticides and grossly underestimate the responsiveness of demand to increases in pesticide prices. Copyright 1997, Oxford University Press.

Dynamic Adjustment in the U.S. Dairy Industry

A dual model is used to examine the dynamic structure of the U.S. dairy industry. Properties implied by the theory of the competitive firm and independent adjustment of two quasi-fixed inputs, labor and herd size, are tested and not rejected. Instantaneous adjustment, however, is soundly rejected for each quasi-fixed input. Input adjustment to optimal levels is estimated to take about two years for labor and ten for cows. Quality adjustments of the labor and cow series do not fully embody the technological change that has occurred in this industry over the study period.

Agricultural Product Supplies and Input Demands: Regional Comparisons

Supply equations for five output groups and demand equations for four input groups in ten regions of the United States are estimated and evaluated. The econometric estimation is conducted for complete regional product supply and input demand systems subject to competitive theory. The results document the extreme diversity of production relationships within the United States. They clearly indicate the unequal effects of changes in economic conditions and government policies on major production regions.

Multiproduct Supply and Input Demand in U.S. Agriculture

Two sets of U.S. agricultural output supply and input demand relationships, including cross-price effects, are reported for five commodity groups and four variable input groups for the 1951–82 period. They are obtained by direct econometric estimation on U.S. data and by geographic aggregation from published econometric estimates for each of ten regions comprising the contiguous forty–eight states. The supply and demand formulations are specified on the assumptions of competitive behavior and an underlying normalized quadratic profit function. The effects of upward-sloping input supply curves are examined at the national level.

Trade Liberalization and Agricultural Chemical Use: United States and Mexico

To anticipate the likely effects of recent trade agreements with Mexico on the environment and food safety, this paper examines changes in agricultural chemical use. Econometric estimation and simulation suggest that the combined effects of the North American Free Trade Agreement (NAFTA), economic growth, research investment, and farm policy are expected to increase chemical usage substantially in the United States and undoubtedly lead to greater groundwater contamination. In Mexico, the expected effects are a substantial increase in fertilizer use but a decrease in pesticide use. Increases in private research investment are expected to increase the use of both types of chemicals, but increases in public research investment in the United States are not.

Research and Productivity in Mexican Agriculture

Partial and total factor productivity (TFP) measures of Mexican agriculture are calculated for 1960–90. The long-run effects of research and international transfer of technology on TFP are examined over the 1940-90 period using cointegration procedures. TFP increased at an average annual rate of 2.5%, exceeding the corresponding growth in the United States (2.1%). TFP grew particularly fast in the 1960s and 1970s. A 1% rise in research investment increased TFP by 0.13%, and a 1% increase in U.S. TFP translated into a 1.11% increase in Mexican TFP. The average annual rate of return to research investment is about 64%. Copyright 1997, Oxford University Press.

Derived Demand for Irrigation Water: The California Aqueduct

Estimation of the demand function for area resources is a major concern of many regional economic analyses. Resource demand is dependent upon several variables, including the nature of demand for the products, supply of other inputs, degree of substitutability of inputs, the time period available for adjustment, and market structure. A major problem is how to explicitly consider these important variables in a reasonable manner with limited research means. This paper reports the application of one approach, a regional linear programming allocation model for California, to the derivation of demand for irrigation water as a productive input to agriculture in one developing subregion – the West Side of the San Joaquin Valley.