The Estimation of Product Supply and Input Demand by the Differential Approach

Abstract

Abstract This paper makes use of the differential approach to the theory of the multiproduct firm in order to empirically analyze input demand and product supply in Italian agriculture. Estimation of the parameters of the model with annual (1961–80) data for a sector model of fourteen products and three factors of production suggests possibilities for farmers to change their output mix in response to changes in the expected prices of products. On the input demand side, the derived demand functions seem to satisfy the integrability conditions but turn out to be quite inelastic.