A Methodological Aggregation-consistent Individual Level Supply Response Model

Government interventions in agricultural markets in order to stabilize commodity prices and producer incomes have had a long tradition. Intervention has been at both the state and country levels and has been for the most part in the form of commodity-based schemes. This study represents an attempt to develop an appropriate methodology for analyzing the aggregate effects of a particular type of policy rule. This type of policy rule is one for which the unit of observation is the individual farm unit rather than the individual unit of commodity. The methodology developed in this paper represents an initial attempt to provide the necessary micro-macro modeling with supply response which is required for analyzing the aggregate effects of whole-farm income support programs. The methodology will be illustrated by an empirical application of the aggregate impacts of the whole-farm program in Saskatchewan, Canada