A Model of Production with Supply Management for the Canadian Agricultural Sector

Abstract

Abstract The production structure of the Canadian agricultural sector is modeled by an output‐constrained multiproduct profit function to account for the existence of supply management policies. The le Chatelier effects of supply constraints are illustrated, and the comparative statics of supply management is shown to depend, under input normality, on the type of jointness. Convexity is tested and accepted, and nonjointness is rejected by the estimated normalized quadratic profit function. The results support the hypothesis of nonjointness due to allocatable fixed factors. Decreasing the supply of managed commodities will increase the supply of unrestricted commodities, while total input use is reduced.