Estimating production response of broadacre farms in Western Australia: the nexus of empirics and economics revisited

Abstract

Reliable estimates of elasticities are fundamental requirement to accurate economic forecasting and valid analyses of the impacts of changes in government policies or international events. The aim of this paper is thus, to estimate production response for broadacre farms in Western Australia by using a normalized quadratic profit function for the period 1977/78 to 2005/06. The result reflects the imposition of curvature restrictions for a normalized profit function, and estimated elasticities are found to be less elastic in the short run. The results from this exercise can be used in a number of ways, depending on the policy objective in mind, such as simulation for forecasting agricultural production.