TESTING FOR DYNAMIC MISSPECIFICATION OF INPUT DEMAND-FUNCTIONS - AN APPLICATION TO CANADIAN AGRICULTURE

Previous applications of the intertemporal quadratic adjustment cost m odel in agriculture have failed to consider information gained from pr e-testing in choosing an appropriate specification for dynamic demand of quasi-fixed inputs. A test strategy is outlined taking account of t his information in order to consistently estimate adjustment cost and discount rate parameters. Canadian agricultural data are used in the e mpirical analysis. Test results suggest that the intertemporal quadrat ic adjustment cost model is inappropriate for modeling dynamic demand for land, labor and machinery.