A Duality Approach to Testing the Economic Behaviour of Dairy-Marketing Co-operatives: The Case of Ireland



Proceeding on this basis we furnish in Table 2 estimates of elasticities for the endogenous variables
calibrated to the 1987 data point.

Table 2: Elasticity Estimates for the Dairy-processing sector, Ireland, 1987

Exogenous Variables

Endogenous

Variable

Price of

Proc.

Output

Wage

Rate

Price of

Non-Milk

Materials

Time

Trend

Volume of

Milk

Materials

Capital

Stock

Processed

Output

0.69

(11.13)

-0.02

(3.08)

-0.68

(0.00)

-0.01

(0.99)

0.60

(15.71)

0.17

(2.41)

Labour

0.25

(3.08)

-0.37

(3.44)

0.11

(0.00)

-0.02

(1.68)

-0.24

(2.03)

0.45

(5.13)

Non-Milk

Materials

1.92

(0.00)

0.02

(0.00)

-1.94

(0.00)

0.00

(0.00)

0.43

(0.00)

0.40

(0.00)

Milk Price

1.28

(15.71)

0.04

(2.03)

-0.32

(0.00)

-0.04

(4.83)

0.08

(0.59)

0.07

(0.85)

'.K 2 by equation:

15(a): 0.99

15(b): 0.85

15(c): 0.74

15(d): 0.41

First-order autocorre
parameter by equatio
15(a): 0.56
15(b): 0.50
15(c): 0.32
15(d): 0.67

lation

n:

D.W. by equation:

15(a): 1.85

15(b): 1.56

15(c): 1.64

15(d): 2.49

t-ratios in parentheses beneath the coefficient estimates.

The most interesting results concern the milk price responses. The elasticity of milk price with
respect to milk volume implies a perfectly horizontal demand curve for milk materials. The milk
price is only affected positively by shifts in the exogenously determined processed output price and
while variations in the price of non-milk materials affect the milk price negatively the elasticity is
not statistically significant. This finding is of course consistent with our earlier mentioned result

16



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