Abstract
A system of factor demand and output supply is estimated using an incomplete panel of Dutch dairy farms. The intercepts of the two equations vary over the farms, reflecting differences in quality of labor and land. Comparison of fixed effects estimates and random effects estimates using a Hausman test favors the fixed effects model. The theoretical framework fits the data well. The own-price elasticity of the output supply is small, 0.10. The effect of land on the output supply mainly lies in the scarcity of land in the Dutch dairy sector. The effect of capital on the output supply is mainly caused by the influence of capital on the demand for feed. Copyright 1992 by Oxford University Press.
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