A Polynomial Lag Formulation of Milk Production Response

Abstract

Abstract For much of agricultural production, output response to some given price change is hypothesized to increase first through time and then decline. To detect this type of response, a polynomial price lag model is estimated for milk production. For comparison purposes, a geometrically declining price lag model is also estimated. Although the estimates of long‐run supply elasticities do not critically depend on the type of model used, the response for each period of time and for various short‐run intervals does.