Elasticities of substitution between marketing and farm inputs in a complete system of food commodities

The elasticities of substitution between marketing and farm inputs are important for modeling the shape of derived demand and understanding the market structure in the food market. Wohlgenant develops a theoretical framework and finds significant substitution between marketing and farm inputs. The e...

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Bibliographic Details
Published in:Applied economic perspectives and policy 2023-09, Vol.45 (3), p.1450-1471
Main Authors: Lee, Youhong, Li, Qingxiao, Çakır, Metin
Format: Article
Language:English
Subjects:
demand interrelationships
Estimates
Farms
Food
input substitution
Marketing
marketing margins
replication
Substitutes
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Summary:The elasticities of substitution between marketing and farm inputs are important for modeling the shape of derived demand and understanding the market structure in the food market. Wohlgenant develops a theoretical framework and finds significant substitution between marketing and farm inputs. The estimates in Wohlgenant have been widely used in economic studies on the US food market, and in this paper, we replicate the results, perform robustness checks, and update the estimates using recent data. Despite minor discrepancies, we are able to replicate most of the results in Wohlgenant and maintain robust estimates when we apply ridge regression. Using updated data, we calculate new estimates of the elasticities and find that marketing firms have become less competitive. We discuss important market trends in recent years and highlight potential venues for future research.
ISSN:2040-5790
2040-5804
DOI:10.1002/aepp.13322