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Input Substitution and the Distribution of Surplus Gains from Lower U.S. Beef-Processing Costs

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  • John D. Mullen
  • Michael K. Wohlgenant
  • Donald E. Farris

Abstract

Analysis of a switch from boxed beef to tray-ready beef processing demonstrates that limited substitution between farm and nonfarm inputs has a significant impact on the distribution of surplus gains. A two-input, two-output (beef and by-products) industry model was specified. Technical change was modeled as a shift in marketing input supply. This approach yields equivalent results to a demand increase from biased technical change. Using an estimated elasticity of substitution of 0.1 and parameter values from previous studies, the results indicate cattle producers would receive either 57% or 72% of surplus gains depending upon whether input substitution occurs.

Suggested Citation

  • John D. Mullen & Michael K. Wohlgenant & Donald E. Farris, 1988. "Input Substitution and the Distribution of Surplus Gains from Lower U.S. Beef-Processing Costs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 70(2), pages 245-254.
    • Handle: RePEc:oup:ajagec:v:70:y:1988:i:2:p:245-254.
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