Factor Substitution in Dairy Farming: A Comparison of Allen and Morishima Elasticities

Ahmad, Munir and Bravo-Ureta, Boris and Wackernagel, Rick (1993): Factor Substitution in Dairy Farming: A Comparison of Allen and Morishima Elasticities.

Abstract

This paper uses a non-homothetic translog cost function to calculate Allen and Morishima elasticities of substitution (AESs and MESs) based on panel data for 11 Vermont dairy farms over a 24 year period. The results indicate that there is a substantial difference between the computed AESs and MESs. The estimates show that the AESs overstate both the substitution and complementary relationships among the inputs. Overall, the MES measures suggest that the dairy farm technology is quite flexible.

• Item Type: MPRA Paper
• Language: English
• Keywords: Factor Substitution, Allen and Morishima Elasticities, Dairy
• Subjects: Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q1 - Agriculture > Q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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