The demand for electricity in western U.S. irrigated agriculture : a dual cost function analysis Public Deposited

http://ir.library.oregonstate.edu/concern/graduate_thesis_or_dissertations/8049g870p

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  • The overall objective of the research reported here is to empirically measure the ability of farmers to mitigate the impact of rising electricity prices by substituting relatively inexpensive alternative inputs. A dual cost methodology is employed because it allows theoretically consistent derivation of own price and factor substitution elasticities, conditional upon exogenously determined environmental, economic and technological constraints. Furthermore, the framework allows for an assessment of the appropriateness of producer cost minimization behavior, which has been assumed but not explicitly tested in earlier studies. A secondary objective is to analyze possible implications of future irrigation electricity price changes on producer, regional economic and electric utility company welfare. The most notable finding is that the demand for irrigation electricity is quite price elastic. This indicates that, historically, when the price of electricity has been relatively high, producers have found ways to use less of this input. The derived price elasticity of demand for irrigation electricity (-1.45) confirms results of other researchers. Gardener and Young; Whittlesey; and Maddigan, Chern and Rizy all estimated price elasticity for irrigation in the range from -1 to -2. Tests of the conditions necessary to maintain the assumption of cost minimization, do not confirm that this assumption is strictly justified in the present study.
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