IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/96-8.html
   My bibliography  Save this paper

Why are estimates of agricultural supply response so variable?

Author

Listed:
  • Francis X. Diebold
  • Russell L. Lamb

Abstract

Estimates of the response of agricultural supply to movements in expected price display curiously large variation across crops, regions, and time periods. We argue that this anomaly may be traced, at least in part, to the statistical properties of the commonly-used econometric estimator, which has infinite moments of all orders and may have a bimodal distribution. We propose an alternative minimum-expected-loss estimator, establish its improved sampling properties, and argue for its usefulness in the empirical analysis of agricultural supply response.

Suggested Citation

  • Francis X. Diebold & Russell L. Lamb, 1996. "Why are estimates of agricultural supply response so variable?," Finance and Economics Discussion Series 96-8, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:96-8
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/feds/1996/199608/199608abs.html
    Download Restriction: no
    File URL: http://www.federalreserve.gov/pubs/feds/1996/199608/199608pap.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Marc Nerlove, 1979. "The Dynamics of Supply: Retrospect and Prospect," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(5), pages 874-888.
    2. Zellner, Arnold, 1985. "Bayesian Econometrics," Econometrica, Econometric Society, vol. 53(2), pages 253-269, March.
    3. William G. Tomek & Robert J. Myers, 1993. "Empirical Analysis of Agricultural Commodity Prices: A Viewpoint," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 15(1), pages 181-202.
    4. Zaman, Asad, 1981. "Estimators without moments : The case of the reciprocal of a normal mean," Journal of Econometrics, Elsevier, vol. 15(2), pages 289-298, February.
    5. Braulke, Michael, 1982. "A Note on the Nerlove Model of Agricultural Supply Response," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 23(1), pages 241-244, February.
    6. Bewley, Ronald & Fiebig, Denzil G, 1990. "Why Are Long-run Parameter Estimates So Disparate?," The Review of Economics and Statistics, MIT Press, vol. 72(2), pages 345-349, May.
    7. Marc Nerlove & William Addison, 1958. "Statistical Estimation of Long-Run Elasticities of Supply and Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 40(4), pages 861-880.
    8. Fomby, Thomas B. & Guilkey, David K., 1978. "On choosing the optimal level of significance for the Durbin-Watson test and the Bayesian alternative," Journal of Econometrics, Elsevier, vol. 8(2), pages 203-213, October.
    9. Jere R. Behrman, 1966. "Price Elasticity of the Marketed Surplus of a Subsistence Crop," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(4_Part_I), pages 875-893.
    10. 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.
    11. Bruce L. Gardner, 1992. "How the Data We Make Can Unmake Us: Annals of Factology," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(5), pages 1066-1075.
    12. Zellner, Arnold & Geisel, Martin S, 1970. "Analysis of Distributed Lag Models with Application to Consumption Function Estimation," Econometrica, Econometric Society, vol. 38(6), pages 865-888, November.
    13. Park, Soo-Bin, 1982. "Some sampling properties of minimum expected loss (MELO) estimators of structural coefficients," Journal of Econometrics, Elsevier, vol. 18(3), pages 295-311, April.
    14. ZAMAN, Asad, 1981. "Estimators without moments," LIDAM Reprints CORE 432, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    15. Zellner, Arnold, 1978. "Estimation of functions of population means and regression coefficients including structural coefficients : A minimum expected loss (MELO) approach," Journal of Econometrics, Elsevier, vol. 8(2), pages 127-158, October.
    16. Zellner, Arnold, 1998. "The finite sample properties of simultaneous equations' estimates and estimators Bayesian and non-Bayesian approaches," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 185-212.
    17. Askari, Hossein & Cummings, John Thomas, 1977. "Estimating Agricultural Supply Response with the Nerlove Model: A Survey," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 257-292, June.
    18. Just, Richard E., 1993. "Discovering Production and Supply Relationships: Present Status and Future Opportunities," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 61(01), pages 1-30, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Keeney, Roman & Hertel, Thomas W., 2008. "Yield Response To Prices: Implications For Policy Modeling," Working papers 45969, Purdue University, Department of Agricultural Economics.
    2. Stigler, Matthieu M., 2018. "Supply response at the field-level: disentangling area and yield effects," 2018 Annual Meeting, August 5-7, Washington, D.C. 274343, Agricultural and Applied Economics Association.
    3. Kleibergen, Frank & Zivot, Eric, 2003. "Bayesian and classical approaches to instrumental variable regression," Journal of Econometrics, Elsevier, vol. 114(1), pages 29-72, May.
    4. Amina Al Naabi & Shekar Bose, 2020. "Do Regulatory Measures Necessarily Affect Oman’s Seafood Export-Supply?," SAGE Open, , vol. 10(3), pages 21582440209, August.
    5. Arnold Zellner, 2003. "Some Recent Developments in Econometric Inference," Econometric Reviews, Taylor & Francis Journals, vol. 22(2), pages 203-215.
    6. Lamb, Russell L., 2000. "Food crops, exports, and the short-run policy response of agriculture in Africa," Agricultural Economics, Blackwell, vol. 22(3), pages 271-298, April.
    7. Traoré, Fousseini, 2013. "Estimating the supply elasticity of cotton in Mali with the Nerlove Model: A bayesian method of moments approach," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(3).
    8. Shen, Edward Z. & Perloff, Jeffrey M., 2001. "Maximum entropy and Bayesian approaches to the ratio problem," Journal of Econometrics, Elsevier, vol. 104(2), pages 289-313, September.
    9. Demont, Matty & Tollens, Eric, 2001. "Uncertainties Of Estimating The Welfare Effects Of Agricultural Biotechnology In The European Union," Working Papers 31828, Katholieke Universiteit Leuven, Centre for Agricultural and Food Economics.
    10. Kim, Jae H. & Fraser, Iain & Hyndman, Rob J., 2011. "Improved interval estimation of long run response from a dynamic linear model: A highest density region approach," Computational Statistics & Data Analysis, Elsevier, vol. 55(8), pages 2477-2489, August.
    11. Roman Keeney & Thomas W. Hertel, 2008. "U.S. Market Potential For Dried Distillers Grain With Solubles," Working Papers 08-13, Purdue University, College of Agriculture, Department of Agricultural Economics.
    12. Hee Mok Park & Puneet Manchanda, 2015. "When Harry Bet with Sally: An Empirical Analysis of Multiple Peer Effects in Casino Gambling Behavior," Marketing Science, INFORMS, vol. 34(2), pages 179-194, March.
    13. Psaradakis, Zacharias & Sola, Martin, 1998. "Finite-sample properties of the maximum likelihood estimator in autoregressive models with Markov switching," Journal of Econometrics, Elsevier, vol. 86(2), pages 369-386, June.
    14. Anbes Tenaye, 2020. "New Evidence Using a Dynamic Panel Data Approach: Cereal Supply Response in Smallholder Agriculture in Ethiopia," Economies, MDPI, vol. 8(3), pages 1-24, July.
    15. Zellner, Arnold & Tobias, Justin, 2001. "Further Results on Bayesian Method of Moments Analysis of the Multiple Regression Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(1), pages 121-140, February.
    16. Ball, V. Eldon & Moss, Charles B. & Erickson, Kenneth W. & Nehring, Richard F., 2003. "Modeling Supply Response In A Multiproduct Framework Revisited: The Nexus Of Empirics And Economics," 2003 Annual meeting, July 27-30, Montreal, Canada 21981, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Zellner, Arnold, 1998. "The finite sample properties of simultaneous equations' estimates and estimators Bayesian and non-Bayesian approaches," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 185-212.
    18. Andres Ramirez-Hassan & Manuel Correa-Giraldo, 2018. "Focused econometric estimation for noisy and small datasets: A Bayesian Minimum Expected Loss estimator approach," Papers 1809.06996, arXiv.org.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shen, Edward Z. & Perloff, Jeffrey M., 2001. "Maximum entropy and Bayesian approaches to the ratio problem," Journal of Econometrics, Elsevier, vol. 104(2), pages 289-313, September.
    2. Traoré, Fousseini, 2013. "Estimating the supply elasticity of cotton in Mali with the Nerlove Model: A bayesian method of moments approach," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(3).
    3. Anbes Tenaye, 2020. "New Evidence Using a Dynamic Panel Data Approach: Cereal Supply Response in Smallholder Agriculture in Ethiopia," Economies, MDPI, vol. 8(3), pages 1-24, July.
    4. Md Zabid Iqbal & Bruce A. Babcock, 2018. "Global growing‐area elasticities of key agricultural crops estimated using dynamic heterogeneous panel methods," Agricultural Economics, International Association of Agricultural Economists, vol. 49(6), pages 681-690, November.
    5. Kim, Jae H. & Fraser, Iain & Hyndman, Rob J., 2011. "Improved interval estimation of long run response from a dynamic linear model: A highest density region approach," Computational Statistics & Data Analysis, Elsevier, vol. 55(8), pages 2477-2489, August.
    6. Leaver, Rosemary, 2003. "Measuring The Supply Response Function Of Tobacco In Zimbabwe," 2003 Annual Conference, October 2-3, 2003, Pretoria, South Africa 19079, Agricultural Economics Association of South Africa (AEASA).
    7. Shengying Zhai & Qihui Chen & Wenxin Wang, 2019. "What Drives Green Fodder Supply in China?—A Nerlovian Analysis with LASSO Variable Selection," Sustainability, MDPI, vol. 11(23), pages 1-17, November.
    8. Tomek, William G., 2000. "Commodity Prices Revisited," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(2), pages 1-13, October.
    9. Kleibergen, Frank & Zivot, Eric, 2003. "Bayesian and classical approaches to instrumental variable regression," Journal of Econometrics, Elsevier, vol. 114(1), pages 29-72, May.
    10. Lamb, Russell L., 2000. "Food crops, exports, and the short-run policy response of agriculture in Africa," Agricultural Economics, Blackwell, vol. 22(3), pages 271-298, April.
    11. Carson, Richard T. & Czajkowski, Mikołaj, 2019. "A new baseline model for estimating willingness to pay from discrete choice models," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 57-61.
    12. Fajar, Muhammad & Winarti, Yuyun Guna, 2020. "Modeling of Big Chili Supply Response Using Bayesian Method," MPRA Paper 106098, University Library of Munich, Germany, revised 21 Dec 2020.
    13. Rosa, Franco & Vasciaveo, Michela & Weaver, Robert D., 2014. "Agricultural and oil commodities: price transmission and market integration between US and Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 3(2), pages 1-25, August.
    14. Vavra, Pavel & Colman, David, 2003. "The analysis of UK crop allocation at the farm level: implications for supply response analysis," Agricultural Systems, Elsevier, vol. 76(2), pages 697-713, May.
    15. Torok, Steven John, 1982. "International trade in commodities and labor: the case of the importation of Mexican agricultural labor and fresh market winter tomatoes into the US, 1964-1979," ISU General Staff Papers 198201010800008550, Iowa State University, Department of Economics.
    16. Wall, Charles A. & Fisher, Brian S., 1988. "Supply Response and the Theory of Production and Profit Functions," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 56(03), pages 1-22, December.
    17. Arnold Zellner, 2003. "Some Recent Developments in Econometric Inference," Econometric Reviews, Taylor & Francis Journals, vol. 22(2), pages 203-215.
    18. John Roufagalas, 2015. "Supply Locus: A Note on the Supply Decisions of Monopolistic Firms," Journal for Economic Educators, Middle Tennessee State University, Business and Economic Research Center, vol. 15(1), pages 13-18, Fall.
    19. Shikur, Zewdie Habte, 2021. "Potato and Tomato Supply and Yield Responses to Policy in Ethiopia," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    20. Skold, Karl Durwood, 1989. "The integration of alternative information systems: an application to the Hogs and Pigs report," ISU General Staff Papers 1989010108000010239, Iowa State University, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:96-8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.