Demand and Substitution of Agricultural Inputs in the Central Corn Belt States
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This study estimates shortrun and longrun elasticities for agricultural inputs, along with
elasticities of substitution, using a theoretically consistent restricted profit function and
a series of decomposition equations. The model is also disaggregated on the input
side, uses a flexible functional form, incorporates the effect of agricultural policies,
and introduces a weather index. The methodology is applied to the central Com Belt
States and is used to calculate the effect of market-oriented policies to reduce chemical
input use. The study finds that producers' responsiveness to price changes of fertilizer
and pesticides is very small in the short run and moderate in the long run. Ad
valorem taxes would have negligible shortrun and small longrun effects on chemical
input use while restructuring Federal programs appears to be effective in the long run.