Nonrobustness of Dynamic Dual Models of the Northeastern and U.S. Dairy Industries

The robustness of dynamic dual models examined by Howard and Shumway is reevaluated with the proper specification for the modified generalized Leontief (GL) and normalized quadratic (NQ) functional forms. In an application to the Northeastern and U.S. dairy industries, the theoretical properties, adjustment rates, and predictive ability were similar under both functional forms. However, elasticity measures differed significant y. In a recent NJARE article, Howard and Shumway examine the robustness of dynamic dual models to the choice of functional form. The use of these models to examine industry structure has grown from the initial conceptualization by Epstein due to the models ’ ability to determine an adjustment path for each quasi-fixed input which is theoreti-cally consistent with the optimizing behavior of the firm. However, in order for the micro-level theory of dynamic duality to be applied at the macro level