Examining the input and output linkages in agricultural production systems

Dong Hee Suh, Charles B. Moss

Research output: Contribution to journalArticlepeer-review

Abstract

This paper conducts a comprehensive analysis of the agricultural sector’s resource allocation and production decisions. This paper uses the differential systems with quasi-fixity to evaluate the complete agricultural production system, which examines the input and output linkages in terms of elasticities. The differential systems are estimated using the maximum likelihood estimation technique based on the two-step profit-maximizing procedure in theory. The results reveal that livestock production requires more intermediate inputs, but crop production depends on all the inputs, such as labor, capital, and intermediate inputs. In addition, the results show that input demand is inelastic, indicating that the agricultural sector has little flexibility in adjusting the demand for inputs in response to changes in input prices. Substitutable relationships among labor, capital, and intermediate inputs exist, which may reduce the pressures on production costs when input prices rise. Regarding the quasi-fixed input, land expansion changes the composition of labor and intermediate inputs, showing that the agricultural sector reduces the intensive margin when it pursues the extensive margin. Furthermore, the results show that agricultural supply is not very responsive to the respective price changes. Along with the inelastic output supply, there exist substitutable relationships between livestock and crop supply, showing that relative price changes can alter output composition in supply. The agricultural sector also reallocates more land areas into crop production rather than livestock production.

Original languageEnglish
Article number54
Pages (from-to)1-13
Number of pages13
JournalAgriculture (Switzerland)
Volume11
Issue number1
DOIs
Publication statusPublished - 2021 Jan

Keywords

  • Agricultural production
  • Crop output
  • Differential input demand
  • Differential output supply
  • Farm-related output
  • Livestock output
  • Quasi-fixity

ASJC Scopus subject areas

  • Food Science
  • Agronomy and Crop Science
  • Plant Science

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