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Public Infrastructure Impacts on U.S. Agricultural Production: A State-Level Panel Analysis of Costs and Netput Composition

Author: CATHERINE J. MORRISON PAUL, V. ELDON BALL, RONALD G. FELTHOVEN AND RICHARD NEHRING
Published in PFM, Vol. 1 No. 2

In this study we consider the potential for public infrastructure
investment in the transportation (highway) network to enhance the
productivity of the U.S. agriculture sector. Using state level panel data for
1960-1996 we measure cost-saving shadow values for public infrastructure
(G). The analysis is based on a cost function model of land, labor, capital,
fertilizer, pesticide and “other” material input demands, which is
augmented by pricing equations for crop and animal outputs to reflect
profit maximization. We also distinguish the input- and output-specific
components of the shadow value measures, and their implications for netput
compositional changes. The results indicate that infrastructure investment
generates cost-savings benefits from substitution for all inputs, with landusing
and materials-saving biases. In addition, G expenditures are found to
generate larger marginal benefits for animal outputs than for crops.

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