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A Structural Approach to Estimating Rate of Return Expectations of Farmers

Published online by Cambridge University Press:  28 April 2015

Bruce L. Ahrendsen
Affiliation:
University of Arkansas, and a principal of the Center for Farm and Rural Business Finance
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Abstract

A dual cost function approach is developed as an alternative to time series and simplistic approaches for estimating farmers' expected operating rates of return on assets. A translog restricted cost function is estimated using data provided by 152 North Carolina dairy farmers over the period 1976 through 1986. The predicted costs from the fitted restricted cost function are used to construct estimates of farmers' expected operating rates of return on assets. The estimates from this structural approach explain more of the variation in observed rates than do time series estimates or sample mean observed rates.

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Articles
Copyright
Copyright © Southern Agricultural Economics Association 1993

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