Measurement of Returns to Fixed Factors on North Carolina Dairy Farms

A common method used to measure the returns to fixed factors on dairy farms is a residual approach in which all but one of the fixed factors,are valued at current market prices and any remaining income is taken as the return to that factor. When using this method it often is found that the returns to the residual factor is negative, which implies that some or all 0f the returns to fixed factors are below current market values. This report presents the findings of experiments with several statistical models that allow simultaneous estimation of the contribution of each factor to variable profit defined as the difference between cash income and cash expenses adjusted for inventory change. The assumptions of each model are described and the mathematical relationships among the models are summarized. Empirical estimates are calculated fora set of dairy farms in North Carolina for the year 1982.

Issue Date:
Sep 01 1988
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