A NONPARAMETRIC APPROACH TO SHORT-RUN PRODUCTION ANALYSIS IN A DYNAMIC CONTEXT

A nonparametric approach to short-run production analysis from a cost and profit perspectives is developed in the context of an adjustment-cost model. The adjustment-cost hypothesis is incorporated in the theoretical framework in the form of the properties of the firm's technology with respect to the quasi-fixed factors. Nonparametric tests for consistency of a data series with short-run cost minimization and profit maximization are developed and the empirical implementation of these tests to U.S. agriculture is presented. The empirical evidence does not refute that agricultural producers behave collectively as if they were a short-run cost minimizing and profit maximizing firm.