Conventional Production Functions Versus Energy-Term Production Functions: Energy Used for Crop Production in Midwest Agriculture
Mcdowell, Donald Ray
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https://hdl.handle.net/2142/69864
Description
Title
Conventional Production Functions Versus Energy-Term Production Functions: Energy Used for Crop Production in Midwest Agriculture
Author(s)
Mcdowell, Donald Ray
Issue Date
1985
Department of Study
Agricultural Economics
Discipline
Agricultural Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Agricultural
Abstract
Energy is one of the most important inputs in agricultural production. Increased energy usage in the form of machine, inorganic fertilizers and chemicals has drastically increased the productive potential of U.S. farms. Inasmuch as agricultural production is energy dependent, it is also susceptible to reduced energy supplies and higher prices. Past energy curtailments have resulted in higher energy prices which have had an adverse effect on agricultural production by increasing the cost of production.
As production costs increase, farmers typically readjust their resource mix to a new optimal combination for profit maximization. This dissertation offers a means of assessing the likely response of farmers as they adjust their resource use to changing energy prices. The approach employs and compares two models in determining which crop to produce and the choice of inputs, as energy prices modulate.
Cross sectional data for six crops were taken from the Farm Enterprise Data System (FEDS) budgets of 12 Midwestern states. These data were employed in two Cobb-Douglas production functions, one referred to as the conventional model (CM) and the other, referred to as the energy-term model (ETM). The CM contains data in dollar units while the ETM contains data in energy units, Btus. The parameters of both models are estimated by ordinary least squares (OLS) regression. Upon comparing and contrasting the OLS estimates of both models, it was concluded that the energy term model performed statistically better than the conventional model. Therefore, when making resource adjustment decisions to achieve optimal resource allocation, it is advisable to use the estimates generated by the energy-term model.
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