INTERACTION EFFECTS OF PROMOTION, RESEARCH, AND PRICE SUPPORT PROGRAMS FOR U.S. COTTON



4.2 Estimation Results

The statistical results for the preferred models for domestic and export demand are shown in
Table 1. Domestic demand was estimated using 2SLS because of the endogeneity of the price of cotton.
Because first-order autocorrelation in the residuals was found, 2SLS was applied with correction for first-
order autocorrelation in the residuals using the two-step procedure developed by Hatanaka (1976).
Overall, the results seem quite reasonable and suggest a strong and significant impact of promotion and
research on mill consumption of cotton. There is significant seasonality in mill consumption as indicated
by highly significant monthly dummy variables (not included in table). The own-price elasticity of

Table 1. Regression Results for Monthly Demand for U.S. Cotton, 1986-2000

Domestic Demand

Export Demand

Independent
Variable

2SLS and First-Order
Autocorrelation

Independent
Variable

2SLS and First-Order
Autocorrelation

Para-meters

t-values

Elasticity

Parameters t

-values

Elasticity

CONSTANTt

1.75181

2.07

CONSTANTt

338.440

0.77

PCOTTONt

-0.01089

-3.21

-0.413

EXPORTSt-I

0.601

9.27

0.601

PPOLYt

-0.00361

-1.65

-0.129

PCOTTONt

-6.757

-1.98

-0.692

PRAYONt

0.00261

1.50

0.137

PPOLYt

0.748

0.31

0.072

DTEXWAGEt

-0.13169

-0.87

-0.453

WPCOTTONt

7.266

2.23

0.732

WPCOTTONt

0.01264

4.08

0.427

DECIt

-0.389

-0.13

-0.037

DECIt

-0.00723

-2.14

-0.256

FGDPt

0.016

0.52

0.211

DPIt

-67879.7

-0.87

-0.616

ROWSTKt

-3.790E-09

-0.57

-0.103

FGDPt

0.000061

0.79

0.309

SAGPROMt

2.12E-08

2.00

0.023

SAGNARESt

5.12E-07

4.72

0.152

SAGNARESt-1

7.30E-08

0.68

0.022

SAGNARESt-2

2.79E-07

2.75

0.083

SAGNARESt-3

3.16E-07

3.06

0.094

rho

0.19303

2.62

rho

0.07600

-0.53

N

176

N

178

R2

0.7990

R2

0.7540

R

0.7671

R

0.7290

DW

2.0318

DW

1.8939

20



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