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American Economic Review: Vol. 103 No. 6 (October 2013)

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Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate

Article Citation

Roberts, Michael J., and Wolfram Schlenker. 2013. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate." American Economic Review, 103(6): 2265-95.

DOI: 10.1257/aer.103.6.2265

Abstract

We present a new framework to identify supply elasticities of storable commodities where past shocks are used as exogenous price shifters. In the agricultural context, past yield shocks change inventory levels and futures prices of agricultural commodities. We use our estimated elasticities to evaluate the impact of the 2009 Renewable Fuel Standard on commodity prices, quantities, and food consumers' surplus for the four basic staples: corn, rice, soybeans, and wheat. Prices increase 20 percent if one-third of commodities used to produce ethanol are recycled as feedstock, with a positively skewed 95 percent confidence interval that ranges from 14 to 35 percent.

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Authors

Roberts, Michael J. (NC State U)
Schlenker, Wolfram (Columbia U)

JEL Classifications

Q11: Agriculture: Aggregate Supply and Demand Analysis; Prices
Q16: Agricultural R&D; Agricultural Technology; Biofuels; Agricultural Extension Services
Q42: Alternative Energy Sources
Q48: Energy: Government Policy


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