SUPPLY RESPONSE OF TEXAS FIELD CROPS: AN EVALUATION OF THE CET LINEAR SUPPLY MODEL

The constant elasticity of transformation (CET) linear supply model is adapted and evaluated in this analysis of short-run supply response of six Texas field crops. Cross-product supply elasticities are estimated and direct supply elasticities are derived. The sensitivity of estimated parameters to alternative specifications of variables inducing shifts in the production possibilities surface is examined. Shift variables considered include input level, technology, government programs, and weather. The effect of risk on supply response is also examined. The modelÂ’s symmetry assumption is tested and not rejected. All of the own-price elasticities derived from the fully-specified supply model estimates have expected signs, but less than half of the alternative-product price elasticities do. Price parameter signs are quite stable, but the large number of significant risk parameters and unexpected price parameter signs challenges the general adequacy of the CET model for measuring Texas field crop supply response.