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Dynamic Adjustment of U.S. Agriculture to Energy Price Changes

Published online by Cambridge University Press:  26 January 2015

David K. Lambert  and
Jian Gong
David K. Lambert
Affiliation:
Department of Agricultural Economics, Kansas State University, Manhattan, KS
Jian Gong
Affiliation:
Department of Agribusiness and Applied Economics, North Dakota State University, Fargo, ND
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Abstract

Energy prices increased significantly following the first energy price shock of 1973. Agricultural producers found few short run substitution possibilities as relative factor prices changed. Inelastic demands resulted in total expenditures on energy inputs that have closely followed energy price changes over time. A dynamic cost function model is estimated to derive short and long run adjustments within U.S. agriculture between 1948 and 2002 to changes in relative input prices. The objective is to measure the degree of farm responsiveness to energy price changes and if this responsiveness has changed over time. Findings support inelastic demands for all farm inputs. Statistical results support moderate increases in responses to energy and other input price changes in the 1980s. However, demands for all inputs remain inelastic in both the short and long run. Estimation of share equations associated with a dynamic cost function indicates that factor adjustment to input price changes are essentially complete within 1 year.

Keywords

dynamic cost functionenergy pricesU.S. agricultureQ11Q41
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 42 , Issue 2 , May 2010 , pp. 289 - 301
Copyright
Copyright © Southern Agricultural Economics Association 2010

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