Argentine Dairy Chain: A structural analysis of the derivation of intermediate demands to elasticities acquisition

Abstract

Considering the dairy chain’s relevance to the Argentine economy, a structural analysis was carried out deriving the intermediate demands to know the elasticities of this chain. A formal theoretical approach to the chain and its different levels of relationships is defined. Then, using a model of simultaneous equations, each level price and relationship quantities were quantified to evaluate the possible effects of keys variables changes along the whole chain, including prices. Secondary information is used, and the model was estimated by three-stage least squares. It was found that supply and demand are self-price inelastic at all levels, but greater sensitivity to the wholesale price. Among policy variables considered, only taxes on exports are significant. The lack of stock variables and the aggregate data usage is a limitation of this work, but the originality lies in the integral design of the Argentine chain with the simultaneous treatment of the determination of the quantities and prices, allowing to know the relationships along this chain in a complete way.