DISENTANGLING THE EFFECTS OF GENERIC ADVERTISEMENT FROM HEALTH INFORMATION WITHIN A MEAT DEMAND SYSTEM

This paper examines the effect of generic pork promotion within a meat demand system framework. Special focus has been placed on the separation of demand effect of advertising from that of health-related information on product attributes.Demand and Price Analysis, Marketing,

Estimating Structural Changes in the Vertical Price Relationships in U.S. Beef and Pork Markets

This paper examines structural breaks in the vertical price relationships in U.S. beef/cattle and pork/hog sectors using monthly data of the past 40 years. A major methodological issue addressed is how to estimate price relationships when data contain intermittent structural breaks with unknown break dates. The adopted procedures endogenously search for structural break dates while explicitly accounting for this search in statistical inferences. Four breaks for the beef/cattle price relationship and three breaks for the pork/hog price relationship are identified. The estimation results further confirm the importance of allowing for structural breaks in the analysis of vertical price relationships.farm cattle and hog prices, long-run price relationship, retail beef and pork prices, structural breaks of unknown timing, structural changes, vertical price relationship, Industrial Organization, Livestock Production/Industries,

ESTIMATING INVESTMENT RIGIDITY WITHIN A THRESHOLD REGRESSION FRAMEWORK: THE CASE OF U.S. HOG PRODUCTION SECTOR

As the U.S. hog production sector becomes ever more specialized, the importance of capital inputs has heightened. Given that it is costly to adjust the capital stock and that the associated adjustment cost function may exhibit cost asymmetries between investment and disinvestment, profit-maximizing producers may find themselves trapped in a situation where it is neither profitable investing nor worthwhile disinvesting. This article addresses two issues related to the employment of quasi-fixed input in the U.S. hog production sector: does an inaction or sluggish regime exist in the demand for quasi-fixed input, and, if so, to what extent has this impeded adjustment in quasi-fixed input stock and, hence, hog output supply toward the long-term equilibrium levels? The conceptual framework is based on the work by Abel and Eberly and allows for the existence of an inaction/sluggish regime, alongside an investment regime and a disinvestment regime. Quarterly data from 1976 through 1999 are used to estimate the three-regime investment demand equation, treating breeding sows as the quasi-fixed input. The threshold estimation procedure recently advanced by Hansen is adopted. To provide a linkage between breeding herd investment and hog output supply, a hog supply equation, specified in part as a function of lagged breeding stock, is estimated by a least squares procedure. The dynamic recursive system of investment demand and hog supply is used to simulate the effects on breeding stock and hog supply of changes in the magnitude of investment rigidities. The econometric results strongly support the three-regime breeding herd investment model. More than 10 percent of the observations fall into the sluggish regime, indicating that this regime has occurred sufficiently often to warrant attention. The estimated rate of adjustment toward the long-run equilibrium breeding stock is 2.7 percent per quarter. The existence of a linkage between lagged breeding stock and hog supply is confirmed. Thus, the results suggest that it is important to account for investment rigidity when estimating breeding herd demand and hog supply. Simulation results indicate that the effects on breeding stock and hog supply of continued specialization in the hog production sector may not be as significant as what the hog production sector has experienced in the past decades. More importantly the simulations suggest that the impact of increasing investment rigidity is rather modest, about 3 percent at most and, thus, no policy intervention appears to be needed. However, the econometric results clearly indicate that estimates will be biased if investment rigidity is not explicitly accounted for when estimating breeding herd demand and hog supply.Livestock Production/Industries,

DISENTANGLING THE EFFECTS OF GENERIC ADVERTISEMENT FROM HEALTH INFORMATION WITHIN A MEAT DEMAND SYSTEM

This paper examines the effect of generic pork promotion within a meat demand system framework. Special focus has been placed on the separation of demand effect of advertising from that of health-related information on product attributes

Further Evidence of Price Transmission and Asymmetric Adjustment in the U.S. Beef and Pork Sectors

This paper expands the contributions of Goodwin and Holt (AJAE, 1999) and Goodwin and Harper (J. of Ag. and Appl. Econ., 2000), GHH henceforth, who analyze retail-wholesale-farm price transmissions in the U.S. beef and pork industries using weekly data. First, in light of advancements in unit root tests, we re-examine in a more comprehensive manner GHH’s conclusion that the weekly U.S. cattle/beef and hog/pork price series are nonstationary. The conventional augmented Dickey-Fuller test that GHH adopt has low power in discriminating against the unit root null because it does not entertain the possibility of a structure break in the deterministic trend function. Second, we examine more closely the estimation procedure surrounding the long run price linkage equation, ensuring the unbiasedness in the estimated long run price transmission coefficient. Moreover, we ascertain whether there have been structural changes in the long run price linkage equation using a new approach, which endogenously estimates the break date. Third, we employ two data sets with different frequencies, weekly data and monthly data, to gain insight into the reasons underlying price asymmetry found in GHH

Estimating Structural Changes in the Vertical Price Relationships in U.S. Beef and Pork Markets

This paper examines structural breaks in the vertical price relationships in U.S. beef/cattle and pork/hog sectors using monthly data of the past 40 years. A major methodological issue addressed is how to estimate price relationships when data contain intermittent structural breaks with unknown break dates. The adopted procedures endogenously search for structural break dates while explicitly accounting for this search in statistical inferences. Four breaks for the beef/cattle price relationship and three breaks for the pork/hog price relationship are identified. The estimation results further confirm the importance of allowing for structural breaks in the analysis of vertical price relationships

Further Evidence of Price Transmission and Asymmetric Adjustment in the U.S. Beef and Pork Sectors

This paper expands the contributions of Goodwin and Holt (AJAE, 1999) and Goodwin and Harper (J. of Ag. and Appl. Econ., 2000), GHH henceforth, who analyze retail-wholesale-farm price transmissions in the U.S. beef and pork industries using weekly data. First, in light of advancements in unit root tests, we re-examine in a more comprehensive manner GHH’s conclusion that the weekly U.S. cattle/beef and hog/pork price series are nonstationary. The conventional augmented Dickey-Fuller test that GHH adopt has low power in discriminating against the unit root null because it does not entertain the possibility of a structure break in the deterministic trend function. Second, we examine more closely the estimation procedure surrounding the long run price linkage equation, ensuring the unbiasedness in the estimated long run price transmission coefficient. Moreover, we ascertain whether there have been structural changes in the long run price linkage equation using a new approach, which endogenously estimates the break date. Third, we employ two data sets with different frequencies, weekly data and monthly data, to gain insight into the reasons underlying price asymmetry found in GHH.Livestock Production/Industries, Research Methods/ Statistical Methods,

ESTIMATING INVESTMENT RIGIDITY WITHIN A THRESHOLD REGRESSION FRAMEWORK: THE CASE OF U.S. HOG PRODUCTION SECTOR

As the U.S. hog production sector becomes ever more specialized, the importance of capital inputs has heightened. Given that it is costly to adjust the capital stock and that the associated adjustment cost function may exhibit cost asymmetries between investment and disinvestment, profit-maximizing producers may find themselves trapped in a situation where it is neither profitable investing nor worthwhile disinvesting. This article addresses two issues related to the employment of quasi-fixed input in the U.S. hog production sector: does an inaction or sluggish regime exist in the demand for quasi-fixed input, and, if so, to what extent has this impeded adjustment in quasi-fixed input stock and, hence, hog output supply toward the long-term equilibrium levels? The conceptual framework is based on the work by Abel and Eberly and allows for the existence of an inaction/sluggish regime, alongside an investment regime and a disinvestment regime. Quarterly data from 1976 through 1999 are used to estimate the three-regime investment demand equation, treating breeding sows as the quasi-fixed input. The threshold estimation procedure recently advanced by Hansen is adopted. To provide a linkage between breeding herd investment and hog output supply, a hog supply equation, specified in part as a function of lagged breeding stock, is estimated by a least squares procedure. The dynamic recursive system of investment demand and hog supply is used to simulate the effects on breeding stock and hog supply of changes in the magnitude of investment rigidities. The econometric results strongly support the three-regime breeding herd investment model. More than 10 percent of the observations fall into the sluggish regime, indicating that this regime has occurred sufficiently often to warrant attention. The estimated rate of adjustment toward the long-run equilibrium breeding stock is 2.7 percent per quarter. The existence of a linkage between lagged breeding stock and hog supply is confirmed. Thus, the results suggest that it is important to account for investment rigidity when estimating breeding herd demand and hog supply. Simulation results indicate that the effects on breeding stock and hog supply of continued specialization in the hog production sector may not be as significant as what the hog production sector has experienced in the past decades. More importantly the simulations suggest that the impact of increasing investment rigidity is rather modest, about 3 percent at most and, thus, no policy intervention appears to be needed. However, the econometric results clearly indicate that estimates will be biased if investment rigidity is not explicitly accounted for when estimating breeding herd demand and hog supply

Incorporating Structural Changes in Agricultural and Food Price Analysis: An Application to the U.S. Beef and Pork Sectors

Demand and Price Analysis, Livestock Production/Industries,