Production Flexibility and Technical Change in Australia's Wheat-Sheep Zone

The flexibility of production and the bias of technical change in the Wheat- Sheep Zone has been examined by estimating the system of derived output and input share equations from a translog variable profit function. This analysis was undertaken for three outputs (sheep and wool, crops, and beef cattle and other farm output) and five inputs (labour, materials and services, livestock, capital, and land). The supply of each of these three major groups of farm outputs has been inelastic. Sheep enterprise production has been complementary with cropping while crop and beef cattle outputs have not been complementary. The demand for materials and services inputs has been elastic while the elasticity of demand for labour has been approximately unity. Wool and other sheep output has been relatively labour intensive while crops have been relatively capital intensive. Livestock activities (sheep and cattle) have been relatively land intensive. Hence, policies that have caused the price of labour to be greater (less) than it would have been otherwise have discouraged (encouraged) the production of sheep enterprise output relatively more than other farm outputs.