Estimating Disequilibrium Cost Elasticities in Agricultural Production

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Abstract
A restricted cost function is estimated using annual data for western Canadian agriculture over the period 1961–84. Using the parameter estimates, disequilibrium cost elasticities are calculated. The elasticities for the sector indicate that the ex ante market prices of quasi‐fixed inputs were higher than their shadow values. That is, quasi‐fixed factors were underutilized during the sample period. Excess agricultural land contributed most to the cost of disequilibrium.