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Estimating Substitution and Expansion Effects Using a Profit Function Framework
Author(s) -
Lopez Ramon E.
Publication year - 1984
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.2307/1240803
Subject(s) - substitution (logic) , complementarity (molecular biology) , profit (economics) , economics , econometrics , production (economics) , microeconomics , function (biology) , production function , elasticity of substitution , agriculture , substitution effect , industrial organization , computer science , ecology , genetics , evolutionary biology , biology , programming language
This study reports a first attempt to derive all the relevant information with respect to the structure of production of an industry using knowledge of only a profit function. Using estimates of a profit function for Canadian agriculture, a procedure to separate substitution and expansion effects for both inputs and outputs was implemented. Information concerning net input and output substitution and complementarity possibilities were obtained. The most important empirical results suggest that the hypothesis of nonjoint production of crop and animal outputs in Canadian agriculture cannot be rejected, and that hired and operator labor are complements rather than substitutes.