Effects of food and agricultural imports on domestic factors in the U.S. agricultural sector: a translog cost function framework

Abstract

The translog cost function of the U.S. agricultural sector unveils dynamic relationships between foreign and domestic inputs. On average, capital and labour are weak substitutes, but they are strong substitutes to food and agricultural imports. Therefore, enhancing trade policies on food and agricultural products should be supplemented by strategic policies aiming at protecting domestic factors' income.

Keywords:

• Translog cost function
• food imports
• agricultural imports
• United States

JEL Classification:

• C32
• J480
• O330
• Q170

Notes

¹ Time trend is used as a proxy of technology like in Sharma (1991).

² The prices in the remaining equations are expressed in relative terms with respect to the price related to the input share deleted.

³ The production function is nonhomothetic when the technical marginal rate of substitution is different from zero.

⁴ The concept of weak (strong) substitute or complement is related to the fact that the average elasticities are not statistically significant (statistically significant) (Sharma 1991).