Regional Agricultural Production Systems: Estimates for Western Australia

Abstract

A regional model, be it computable general equilibrium or partial equilibrium in construct, which is based on the national parameters would certainly provide misleading results if the regional economy or sector is significantly different from its national counterpart. For a credible and useful quantitative analysis of the regional impacts of changes in, say, government policies or international events, one thus needs an empirically based economic model that reflects the key features of the regional economy or sector concerned. This is the motivation for this paper, which estimates a disaggregated agricultural production system for Western Australia (WA): a key farming State of Australia. The paper uses a profit function approach that explicitly recognizes jointness in agricultural production and various climatic zones in WA, and an estimation procedure that involves the Diewert–Wales decomposition technique. It presents estimates of elasticities of supply responses and input demands in WA agriculture, and compares these with the national estimates.

Modelling agricultural land use allocation in regional Australia

“…Interestingly, the violation of these theoretical expectations is not uncommon in agricultural modelling, for example, Shumway (1995) finds that in 46 studies of North American agriculture, the curvature property was rejected in 36 per cent of cases. Similarly, in three Australian studies (Coelli 1996;Ahammad and Islam 2004;and Xayavong et al 2011), the estimation of unrestricted supply equations led to the violation of curvature conditions. For these cases, the implication is either the data are flawed and/or the theory is inappropriate (Just and Pope 1999).…”

“…This approach has been employed for Western Australian broadacre agriculture by Coelli (1996), Ahammad and Islam (2004) and Xayavong et al (2011). 1 We attempted to employ a restricted seemingly unrelated regressions estimator (SURE) for Equation (4) but without success.…”

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