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Modeling Supply Response with Implicit Revenue Functions: A Policy-Switching Procedure for Rice

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  • Dean T. Chen
  • Shoichi Ito

Abstract

An econometric method of estimating implicit revenue with a policy switching mechanism is proposed for supply response analysis. The model develops important linkages between farm program instruments and commodity market equilibrium and allows evaluation of supply response decisions under conditions of major policy shifts. The econometric procedure developed here is applied to the U.S. rice sector to determine program compliance/noncompliance decisions under three alternative rice program periods. A change in farm prices was found to affect significantly producers' net returns and participation rate. Results indicate price impacts on acreage planted are inelastic for program participants but elastic for nonparticipants.

Suggested Citation

  • Dean T. Chen & Shoichi Ito, 1992. "Modeling Supply Response with Implicit Revenue Functions: A Policy-Switching Procedure for Rice," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(1), pages 186-196.
    • Handle: RePEc:oup:ajagec:v:74:y:1992:i:1:p:186-196.
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    File URL: http://hdl.handle.net/10.2307/1243003
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    Cited by:

    1. Omezzine, Abdallah & Al-Jabri, Omar S., 1998. "Price supply response of vegetable growers in the Sultanate of Oman," Agricultural Economics, Blackwell, vol. 19(3), pages 349-358, December.
    2. Becker, Anthony D. & Judge, Rebecca P., 2012. "Measuring the Effects of Decoupled Payments on Indica Rice Production Under the 1996 and 2002 Farm Bills," Working Papers 120073, St. Olaf College, Department of Economic.
    3. Tomek, William G. & Myers, Robert J., 1993. "Empirical Analysis Of Agricultural Commodity Prices: A Viewpoint," Working Papers 6847, Cornell University, Department of Applied Economics and Management.
    4. Anthony D. Becker & Rebecca P. Judge, 2012. "Measuring the Effects of Decoupled Payments on Indica Rice Production Under the 1996 and 2002 Farm Bills," Working Papers 201201, St. Olaf College, Department of Economics.
    5. Anthony Becker & Rebecca Judge, 2014. "Evidence of Distortionary Effects of Decoupled Payments in U.S. Indica Rice Production," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(3), pages 265-275, September.
    6. Ito, Shoichi & Peterson, E. Wesley F. & Mainali, Bharat & Rosegrant, Mark W., 1999. "Estimates for Evolution of U.S. Rice Supply Response Using Implicit Revenue Functions: Implications to the World Food Supply and Trade," Japanese Journal of Agricultural Economics (formerly Japanese Journal of Rural Economics), Agricultural Economics Society of Japan (AESJ), vol. 1.
    7. Gallagher, Paul W. & Shapouri, Hosein, 2008. "Biomass Crop and Ethanol Supply from Agricultural Lands in the United States with Methodology, Estimation Results, and State-by-State Simulations," Agricultural Economic Reports 308485, United States Department of Agriculture, Economic Research Service.

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