Approximating supply response of a commodity with limited input data: The case of Australian bananas

The Australian banana industry is an example where neither the time series data necessary for estimating grower responses nor the detailed cross sectional data on individual inputs are readily available to enable econometric estimation of producer response to price or cost changes. In this paper a calibration method of a CES production function, based on cost shares of variable and fixed inputs in total production cost, is used to approximate regional supply elasticities for banana growers in Australia. Although this approach to estimation may not be the ideal, it appears to produce plausible results.