ESTIMATION OF SUPPLY AND DEMAND ELASTICITIES OF CALIFORNIA COMMODITIES

The primary purpose of this paper is to provide updated estimates of domestic own-price, cross-price and income elasticities of demand and estimated price elasticities of supply for various California commodities. Flexible functional forms including the Box-Cox specification and the nonlinear almost ideal demand system are estimated and bootstrap standard errors obtained. Partial adjustment models are used to model the supply side. These models provide good approximations in which to obtain elasticity estimates. The six commodities selected represent some of the highest valued crops in California. The commodities are: almonds, walnuts, alfalfa, cotton, rice, and tomatoes (fresh and processed). All of the estimated own-price demand elasticities are inelastic and, in general, the income elasticities are all less than one. On the supply side, all the short-run price elasticities are inelastic. The long-run price elasticities are all greater than their short-run counterparts. The long-run price supply elasticities for cotton, almonds, and alfalfa are elastic, i.e., greater than one. Policy makers can use these estimates to measure the changes in welfare of consumers and producers with respect to changes in policies and economic variables.


Issue Date:
Jun 26 2008
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/37629
Total Pages:
128
JEL Codes:
D120; Q130; Q110
Series Statement:
Working Paper
WP 08-001




 Record created 2017-04-01, last modified 2017-08-22

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