A methodological approach for linking farm and market models by means of econometric response functions

Technical change at the farm level or changes in input prices often entail that the firm's supply function changes. These changes can take place in numerous ways. This paper presents a methodology that increases the consistency in supply responses across various sets of agricultural products and farm types with a market model based on a statistical response function approach. Since most farm simulation models are limited to a subset of regions and farm types, the linkage to an aggregated model requires a procedure for expanding these results to non sample regions, so that full regional coverage is achieved. This paper addresses theoretical aspects related to the consistency between micro and market level models. Next it deals with some empirical findings related to the selection of different functional forms for extrapolation. We conclude with a critical reflection on applicability of this method in addressing further needs on up-scaling of other economic as well as non-economic indicators