Dynamic Adjustment in the U.S. Dairy Industry

Abstract

Abstract A dual model is used to examine the dynamic structure of the U.S. dairy industry. Properties implied by the theory of the competitive firm and independent adjustment of two quasi‐fixed inputs, labor and herd size, are tested and not rejected. Instantaneous adjustment, however, is soundly rejected for each quasi‐fixed input. Input adjustment to optimal levels is estimated to take about two years for labor and ten for cows. Quality adjustments of the labor and cow series do not fully embody the technological change that has occurred in this industry over the study period.

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