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Abstract
The dynamic feedback problem in regional agricultural production response
or planning models can be divided into two parts. One part is intertemporal
dynamic feedback which involves the time-dating relationship
between production response and price as a lagged phenomenon. The other
part of the problem involves changing the aggregation of subgroups over
time. This paper suggests including a first order Markov transition
probability within the model to handle the problem of aggregate changes
over time. Because the model is intertemporal, it also accounts for the
interrelationship among time horizons in the addition to the interrelationship
among subgroups in the model. Including progressive income tax,
which affects production and consumption, normally would require integer
programming to handle the nonconvexity. However, this is handled here by
stepwise approximation and is uniquely connected to the dynamic system of
aggregation in the model.