Question: Table gives the index of crop output Q (indexed to 1992), crop prices P (indexed to 1991- 1992), and disposable income per capita Y (in 1996 dollars), in the United States from 1975 to 1996. Assume that the market is cleared in every year so that Qt represents both the quantity bought and sold in year t.
(a) Estimate by OLS the reduced-form equations.
(b) Calculate the supply structural parameters from the reduced-form coefficients.
(c) How do these compare with the structural parameters obtained by regressing Qt on Pt directly?
Table Index of Crop Output, Prices, and Disposable Income per Capita in 1996 Dollars: United States, 1975-1996
|
Year
|
1975
|
1976
|
1977
|
1978
|
1979
|
1980
|
1981
|
1982
|
1983
|
1984
|
1985
|
|
Q
|
68
|
68
|
74
|
76
|
83
|
75
|
87
|
87
|
68
|
85
|
89
|
|
P
|
88
|
87
|
83
|
89
|
98
|
107
|
111
|
98
|
108
|
111
|
98
|
|
Y
|
14,236
|
14,653
|
15,010
|
15,627
|
15,942
|
15,944
|
16,154
|
16,250
|
16,564
|
17,687
|
18,120
|
|
Year
|
1986
|
1987
|
1988
|
1989
|
1990
|
1991
|
1992
|
1993
|
1994
|
1995
|
1996
|
|
Q
|
84
|
86
|
75
|
86
|
92
|
92
|
100
|
90
|
106
|
96
|
103
|
|
P
|
87
|
86
|
104
|
109
|
103
|
101
|
101
|
102
|
105
|
112
|
127
|
|
Y
|
18,536
|
18,790
|
19,448
|
19,746
|
19,967
|
19,892
|
20,359
|
20,354
|
20,675
|
21,032
|
21,385
|