Explaining Growth in Dutch Agriculture: Prices, Public R&D, and Technological Change

(although the feed input per unit of output significantly declined). Likewise in the arable sector, also
with respect to meat output the role of the capital stock is dominating, whereas the contribution of
R&D expenditure is non-significant. Non-family labor has no significant response to any of the price
variables or quasi-fixed variables.

Table 4 Long-run elasticities (standard errors between brackets)

*) Price elasticities for other capital (OCCAP) and non-family labor (OCLAB); for fixed land inputs, R&D
expenditure and milk quota still quantity-elasticities are presented.

As was indicated in equation 7 also when the model was re-formulated in first-differences a shift-
variable (see constant α_i^* ). This parameter is likely to pick up the trend in the first difference of the
dependent output and input variables (rate of change in output and input levels) not explained by (the
differences in) the other explanatory variables. As such this parameter may also pick up changes in the
quality of the explanatory variables. This seems in particular relevant with respect to the capital and
R&D variables. However, the constants are in no case significantly different from zero.

Table 4 presents the long-run elasticities. With respect to the price responsiveness not much has
changed as compared with the short-run. As is expected from the Le Chatelier-Samuelson theorem, the
long-run price responsiveness is not lower than in the short-run (Chambers, 1988, 145-149). The
increase in price sensitiveness of agricultural output and input is however very limited: the deviation
between the derived long-run and short-run own price elasticities is in all cases less than 2 percent.
This is further emphasized by the significance levels. Because the elasticities are highly non-linear in
the estimated parameters (see for example equation 4), standard errors were simulated using Monte
Carlo-analysis⁵. All own price elasticities, except for the own price response of feed input, appear to
be not significantly different from zero. Except for the labor input equation, the average deviation of
all short-run own-price and cross-price elasticities as compared to the long-run ones is less than 5
percent. The simulated standard deviations for OCCAP have rather extreme values and require futher
analysis.

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