Economic weights from profit equations: appraising their accuracy

Abstract

AbstractDespite much discussion on the use of simple profit equations to estimate economic weights, no study appears to have tested the accuracy of this method. This paper carries out such a test from the viewpoint of the individual farmer by comparing economic weights calculated in the normal way with results gained from a more empirically acceptable, non-linear equation. Although the study concludes that simple profit equations are likely to be sufficiently accurate in most circumstances, further consideration needs to be given to a series of time periods and the industry and economy at large.