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Nonrobustness of Dynamic Dual Models of the U.S. Dairy Industry

Published online by Cambridge University Press:  10 May 2017

Wayne H. Howard  and
C. Richard Shumway
Wayne H. Howard
Affiliation:
Department of Agricultural Economics and Business, University of Guelph (and a former research associate, Texas A&M University)
C. Richard Shumway
Affiliation:
Department of Agricultural Economics, Texas A&M University
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Abstract

The robustness of dynamic dual model results across functional forms is examined for the U.S. dairy industry. Modified generalized Leontief (GL) and normalized quadratic (NQ) functional forms are compared by examining their consistency with properties of the competitive firm, estimated rates of adjustment for cows and labor, tests of technological change, and elasticities. Homogeneity and symmetry are maintained in both models. Convexity is not rejected by the GL and is not seriously violated by the NQ. Absence of technological change is rejected by both models, but quality indexes on labor and cows fully embody technological change occurring within labor and cows in the NQ but not in the GL. Policy-relevant elasticities differ greatly between the functional forms. Dynamic dual models are found to be non-robust in important ways to choice of functional form.

Type
Research Article
Information
Northeastern Journal of Agricultural and Resource Economics , Volume 18 , Issue 1 , April 1989 , pp. 18 - 25
Copyright
Copyright © 1989 Northeastern Agricultural and Resource Economics Association 

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Footnotes

Texas A&M Agricultural Experiment Station Technical Article No. 23573.

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