Factor Substitution in Australian Agriculture

Vincent, David

doi:10.1111/j.1467-8489.1977.tb00199.x

Cited by 16 publications

(9 citation statements)

References 9 publications

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“…Two of the most recent studies are those of Vincent (1977) and McKay, Lawrence, and Vlastuin (1980). Vincent found an almost zero substitution elasticity between land and capital, noting that 'it is reasonable to postulate a degree of complementarity between capital and land' (p. 127).…”

Section: (8)mentioning

confidence: 99%

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A Comparative Analysis of Agricultural Tractor Investment Models

Vanzetti

Quiggin

1985

Australian Journal of Agricultural Economics

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An implicit rental price approach is used to analyse the determinants of farm tractor investment at the aggregate level. Three models, based on different assumed factor substitutabilities, are compared. Variations in the rental price of tractors appear to have less effect on demand than variations in factors affecting the profitability of the cropping enterprise as a whole. The implications for forecasting and for policy instruments, such as the investment allowance, are discussed.There has been a profusion of economic analysis of both investment behaviour and of the determinants of investment decisions. Most of this analysis has dealt with aggregate investment for the entire economy or for particular sectors, rather than with decisions relating to individual types of capital equipment.In this paper, the focus is on investment determinants at the firm level. Three distinct approaches to investment analysis are identified. These are developed at the microeconomic level, by considering the basis of individual decisions, and tested empirically at the aggregate level. Tractors are of interest because of the size of the capital outlay required and the range of different investment theories that have been used to model this decision. In addition, data pertaining to tractors are superior to those relating to other durable farm inputs.Tractors are a significant component of the capital cost of farm machinery (about 40 per cent), which in turn account for about 10 per cent to 15 per cent of total farm costs. Normally, about 12 000 to 14 000 tractor units are sold annually. The average size has trended upward over time. The aggregate investment expenditure in farm tractors was about $400m in 1983-84.Tractor sales have been analysed inter aka by Penson, Hughes, and Nelson (1977), Penson, Romain, and Hughes (1981), Rayner and Cowling (1 967, 1968), Griliches (1 960), and by Filmer and Ferris (1 976). Although a range of approaches has been used, the majority of recent studies have adopted the rental price approach, as expounded by Jorgensen and Stephenson (1 967) and Coen (1 975). This approach has also been used to model aggregate rural sector investment (Fisher 1974).In this paper, a putty-putty model is compared to putty-clay and clayclay models. In the first model, it is assumed that factor proportions are flexible and responsive to relative price movements both before and after the installation of the capital item. The putty-clay model implies fixed factor proportions once the capital has been installed, while the clay-clay alternative is based on the premise that factor proportions are determined by the nature of the production process and are not responsive to relative prices either before or after installation. 122

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Section: (8)mentioning

confidence: 99%

“…Vincent (1977) Thus far, three models of investment have been postulated. These vary in factor substitutability from fully flexible to fully fixed.…”

Section: (8)mentioning

confidence: 99%

A Comparative Analysis of Agricultural Tractor Investment Models

Vanzetti

Quiggin

1985

Australian Journal of Agricultural Economics

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“…Although subsequent findings of Ray (1982) reveal a downward trend in the degree of substitutability over the 1939-77 period, suggesting a diminishing rate of mechanization in U.S. agriculture. In a similar context, but using a broader definition of farm labor, Lopez (1984) suggests a relatively high elasticity of substitution of 1.78 for Canadian agriculture between 1946and 1977. Yet, Vincent (1977 degree of substitutability between labor and capital among Australian farmers.…”

Section: Introductionmentioning

confidence: 99%

“…In a similar context, but using a broader definition of farm labor, Lopez () suggests a relatively high elasticity of substitution of 1.78 for Canadian agriculture between 1946 and 1977. Yet, Vincent () finds a very low degree of substitutability between labor and capital among Australian farmers. Finally, in post‐World War II Japan, the analysis of Kako () suggests that the elasticity of capital–labor substitution in agriculture was 0.93 between 1953 and 1970.…”

Section: Introductionmentioning

confidence: 99%

The Influence of Labor Price Change on Agricultural Machinery Usage in Chinese Agriculture

Liu

Jetté‐Nantel

et al. 2013

Canadian J Agri Economics

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The substitution between rural labor and machinery has been a key determinant of farm production, structure, and efficiency in most developed countries and is expected to play a key role in shaping the future of Chinese agriculture. Using disaggregated farm-level data from Hebei and Shandong provinces of China, we calculated the Allen and Morishima elasticities of substitution between labor and machinery. These elasticities were based on seemingly unrelated regressions and three-stage least squares estimates of the translog cost function and input cost share functions. In contrast to previous studies, we dissaggregate machinery inputs into three categories: large, medium, and small. In addition, the issue of endogeneity in output quantity and input prices is also addressed. The results show strong evidence of substitution between labor and the three categories of machinery inputs. The findings also support substitution among the three categories of machinery themselves. La substitution entre la main-d'oeuvre agricole et la machinerie constitue un déterminant fondamental de la production, de la structure et de l'efficacité des exploitations agricoles dans la plupart des pays développés et elle devrait jouer un rôle clé dans l'évolution de l'agriculture chinoise.À l'aide de données désagrégées sur les exploitations agricoles situées dans les provinces chinoises de Hebei et de Shandong, nous avons calculé lesélasticités de substitution d' Allen et de Morishima entre les facteurs de la main-d'oeuvre et de la machinerie. Le calcul de cesélasticités est basé sur des régressions apparemment indépendantes (SUR) et sur la minimisation des moindres carrés en troisétapes (3SLS). Contrairement auxétudes antérieures, nous avons subdivisé la machinerie en trois catégories : grosse, moyenne et petite. Nous avonségalement examiné l'endogénéité de la quantité d'extrants et des prix des intrants. Les résultats de notreétude illustrent clairement la substitution entre la main-d'oeuvre et les trois catégories de machinerie et appuient aussi la substitution entre les trois catégories de machinerie.

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“…Hence CRESH collapses to CES. Within the IMPACT project, different pairwise elasticities of substitution between labor, land, and capital have been estimated for the agricultural sector as a whole; see Vincent (1977) and Ryland and Vincent (1978). 18. The Milk Cattle and Pigs industry has also increased its share of the meat cattle market.…”

Section: The Agricultural Sectormentioning

confidence: 99%

Modeling growing economies in equilibrium and disequilibrium

1985

Journal of Macroeconomics

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v PREFACEDuring the 1960s and early 1970s multisectoral models developed along two distinct paths.In the first tradition, "systems" models of global growth (e .g., Meadows et aI., 1972) dealt with cumulative interactions among sectors, and showed that resource-intensive rapid growth would result in economic collapse, and, worse yet, that the world would not recognize the catastrophe before it occurred. These models possessed no prices to encourage resource saving, nor did they induce technological change to augment supply, both of which would attenuate or eliminate the predicted catastrophe. At the same time, there appeared a set of increasingly complex planning models, characterized by highly disaggregated inputoutput structures, and focusing on "internal-consistency" compromises to reconcile various demand and supply imbalances implied by the process of economic growth (for a review, see Blitzer et al., 1975). Here too, little attention was paid to how these inconsistencies could be reconciled without invoking ad hoc government policies to ameliorate their consequences.A second and quite different tradition began with the pioneering study by Johanson (l959); in his general equilibrium model, price adjustments reconcile demand and supply and optimal resource allocation is generated endogenously without the intervention of ad hoc policy.The 1970s saw an explosion of complex multisectoral growth models in the first tradition. They incorporated fairly rigid technological relations, utilized large and expanding data bases, and relied extensively on computers for their solution and analysis. These complex models stressed sectoral detail and did not dwell on the actions of the economic agents that in the real world tie these sectors together into a viable political economy. Rather, governments largely represented the agents responsible for setting goals and "reconciling" perceived shortages or glu ts of commodities and factors. These models were expanding black boxes with thousands of equations and an even larger number of parameters designed to guide the policy makers in aggregate economic management.The first tradition had its detractors and many scholars were beginning to recognize the possibility that complex government planning models were yielding diminishing returns: their data requirements were excessive; they highlighted limited choices rather than flexible tradeoffs; they demanded sophisticated control systems to implement their objectives; and they were unreliable in predicting the future course of economic events (see , for a review ofsome of these models). At the same time, macroeconomic theory was being treated with increasing skepticism, and scholars showed an increasing interest in the microeconomic foundations of the aggregate economy (for a review, see Weintraub, 1977).The stage was set to move back toward the second tradition, to simpler general equilibrium models, which highlight specifications of microeconomic behavior. For modeling market economies this meant increased attention to the role of p...

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Factor Substitution in Australian Agriculture

Cited by 16 publications

References 9 publications

A Comparative Analysis of Agricultural Tractor Investment Models

A Comparative Analysis of Agricultural Tractor Investment Models

The Influence of Labor Price Change on Agricultural Machinery Usage in Chinese Agriculture

Modeling growing economies in equilibrium and disequilibrium

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