On the Estimation of Supply and Demand Elasticities of Agricultural Commodites

29 Pages Posted: 26 May 2014

Date Written: April 1, 2014

Abstract

This AGRODEP Technical Note provides a literature review on the topic of estimation of demand and supply elasticities. To this end, it starts the discussion by summarizing the main facets of production theory and consumer theory to introduce the concept of elasticities, with examples of different types of elasticities most utilized in the literature.

Next, it discusses the identification problem in estimating elasticities, i.e. the issue of having to solve for unique values of the parameters of the structural model from the values of the parameters of the reduced form of the model. It summarizes various methodologies employed in the literature to solve this problem and gives practical examples. These solutions include, but are not limited to, using instrumental variables, adopting a recursive structure, holding demand constant, and imposing inequality constraints in order to restrict the domain of estimates.

Keywords: consumer theory, producer theory, elasticity, identification

JEL Classification: Q12, D21, D12, C1

Suggested Citation

Santeramo, Fabio Gaetano, On the Estimation of Supply and Demand Elasticities of Agricultural Commodites (April 1, 2014). Available at SSRN: https://ssrn.com/abstract=2441539 or http://dx.doi.org/10.2139/ssrn.2441539

Fabio Gaetano Santeramo (Contact Author)

University of Foggia ( email )

Largo Papa Giovanni Paolo
Foggia, 71100
Italy

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