A Dynamic Model of Milk Production Response for Pakistan

Economists have long been analysing the determinants of milk production while focusing on the relationship between milk price and production. Brandow (1953) used a single equation regression procedure to estimate the supply response function for the United States. Halvorson (1955) also used a single equation regression .procedure to analyse the determinants of milk production per cow and found milk production to be highly price inelastic. In another study, Halvorson (1958) used the Nerlovian distributed lag model to estimate both short-run and long-run price elasticities of milk production. Here, he found the long-run price elasticities of United States milk production to be in the range of 0.30 to 0.50. Chen et af. (1972) estimated milk production response for both a polynomial and a geometrically declining distributed lag price structure. They found long-run price elasticity to be 2.53. Buckwell (1982) adapted a theory of farm size demonstrated by Kislev and Peterson (1982) to model milk production behaviour in England and Wales. Burton (1984) used a model of the United Kingdom dairy sector to determine simultaneously herd size, number of culls, replacement heifer price, and milk price. In a recent study, Chavas and Kraus (1990) developed a dynamic model of a dairy cow population and milk supply response and applied it to the US Lake States. The authors also calculated dynamic supply elasticities and found the response of supply to market prices to be very inelastic in the short run.