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Modeling Dynamic Adjustment In A Multi-Output Framework

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  • Vasavada, Utpal
  • Ball, V. Eldon

Abstract

A multi-output model is developed within the adjustment cost framework to analyze the structure of dynamic adjustments in U.S. agriculture during the postwar period. An important feature of this model is the econometric model's consistency with dynamic economic theory. Fluctuations in capital stocks, variable inputs, and outputs are explained by changing opportunity costs. Empirical results indicated that durable equipment, farm-produced durables, and family labor exhibited significant rigidity in adjustment as a response to exogenous shocks. The hypothesis that real estate was a variable input, surprisingly, could not be rejected. The univariate flexible accelerator hypothesis, which is widely maintained in most agricultural adjustment studies, is inconsistent with the data.

Suggested Citation

  • Vasavada, Utpal & Ball, V. Eldon, 1988. "Modeling Dynamic Adjustment In A Multi-Output Framework," Staff Reports 278021, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278021
    DOI: 10.22004/ag.econ.278021
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    References listed on IDEAS

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