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Testing for Non-jointness in Oil and Gas Exploration: A Variable Profit Function Approach

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  • Livernois, John R
  • Ryan, David L

Abstract

The empirical validity of the hypothesis of nonjointness is investigated in the context of a multiple-output production process that utilizes both fixed and variable inputs. Specifically, global tests of the hypotheses of almost nonjointness in the input quantities and prices, and separability of inputs and outputs, are conducted using data on oil and natural gas exploration in Alberta, Canada. Based on estimation of a generalized linear-Generalized Leontief variable profit function, the authors reject the separability hypothesis, but not the nonjointness hypothesis. Empirical issues concerning oil and gas exploration activity are examined using the maximum likelihood estimates obtained under nonjointness. Copyright 1989 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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  • Livernois, John R & Ryan, David L, 1989. "Testing for Non-jointness in Oil and Gas Exploration: A Variable Profit Function Approach," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 479-504, May.
    • Handle: RePEc:ier:iecrev:v:30:y:1989:i:2:p:479-504
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    Cited by:

    1. Mohn, Klaus & Osmundsen, Petter, 2008. "Exploration economics in a regulated petroleum province: The case of the Norwegian Continental Shelf," Energy Economics, Elsevier, vol. 30(2), pages 303-320, March.
    2. Brett W. Jordan, 2016. "Behavior of multi-product mining firms," Working Papers 2016-08, Colorado School of Mines, Division of Economics and Business.
    3. Ludo Peeters & Yves Surry, 2000. "Incorporating Price-Induced Innovation in a Symmetric Generalised McFadden Cost Function with Several Outputs," Journal of Productivity Analysis, Springer, vol. 14(1), pages 53-70, July.
    4. Sean Pascoe & Phoebe Koundouri & Trond Bjørndal, 2007. "Estimating Targeting Ability in Multi-Species Fisheries: A Primal Multi-Output Distance Function Approach," Land Economics, University of Wisconsin Press, vol. 83(3), pages 382-397.
    5. Günter Lang, 2001. "Global Warming and German Agriculture Impact Estimations Using a Restricted Profit Function," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 19(2), pages 97-112, June.
    6. James L. Smith, 2015. "Valuing Barrels of Oil Equivalent," The Energy Journal, International Association for Energy Economics, vol. 0(Adelman S).
    7. H. Ahammad & N. Islam, 1999. "Estimating the WA Agricultural Production System: A profit function approach," Economics Discussion / Working Papers 99-11, The University of Western Australia, Department of Economics.
    8. John T. Cuddington & Diana L. Moss, 2001. "Technological Change, Depletion, and the U.S. Petroleum Industry," American Economic Review, American Economic Association, vol. 91(4), pages 1135-1148, September.
    9. John T. Cuddington & Diana L. Moss, 1996. "The Finding Cost of Natural Gas: Technological Change versus Resource Depletion," Microeconomics 9610004, University Library of Munich, Germany, revised 30 Jul 1998.
    10. Barbara Hutniczak & Niels Vestergaard & Dale Squires, 2019. "Policy Change Anticipation in the Buyback Context," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 73(1), pages 111-132, May.
    11. Guenter Lang, 1999. "Global Warming and German Agriculture," Discussion Paper Series 185, Universitaet Augsburg, Institute for Economics.
    12. Fawson, Chris & Shumway, C. Richard, 1990. "Endogenous Regional Agricultural Production Technologies," 1990 Annual meeting, August 5-8, Vancouver, Canada 270879, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Abbott, Joshua K. & Wilen, James E., 2009. "Rent dissipation and efficient rationalization in for-hire recreational fishing," Journal of Environmental Economics and Management, Elsevier, vol. 58(3), pages 300-314, November.
    14. Jordan, Brett W, 2017. "Companions and competitors: Joint metal-supply relationships in gold, silver, copper, lead and zinc mines," Resource and Energy Economics, Elsevier, vol. 49(C), pages 233-250.
    15. Jordan, Brett, 2018. "Economics literature on joint production of minerals: A survey," Resources Policy, Elsevier, vol. 55(C), pages 20-28.
    16. Davis, George C. & Jensen, Kimberly L., 1994. "Two-Stage Utility Maximization And Import Demand Systems Revisited: Limitations And An Alternative," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 19(2), pages 1-16, December.
    17. Steven Buccola, 2000. "Material And Value-Adding Inputs In Manufacturing Enterprises," Journal of Productivity Analysis, Springer, vol. 13(3), pages 231-247, May.

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