A Linear Approximate Acreage Allocation Model

It is shown that the first-order differential acreage allocation model developed by Bettendorf an Bloome and by Barten and Vanloot, and based on certainty equivalent profit maximization, may be extended to a levels version. The levels model, referred to as a linear approximate acreage allocation model, is potentially useful when panel or cross-sectional data are employed. An empirical application with U.S. state-level corn flex acreage data for the period 1991-95 indicates the feasibility of the approach. Estimated price and scale elasticities are generally larger than previous estimates, and are perhaps indicative of acreage response under the provisions of the 1996 Farm Act.

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