Farm‐Level Fertilizer Demand in Java: A Meta‐Production Function Approach

Abstract This paper models seed variety choice and the demand for variable inputs as jointly determined by profit‐maximizing cultivators. The approach parallels that of Hayami and Ruttan, who postulated that changes in the output‐fertilizer price ratio induce movements along a meta‐fertilizer response function, the envelope of individual variety‐specific response surfaces. Ignoring the possibility of seed variety switching leads to underestimates of fertilizer demand elasticities. In addition, estimation with samples reflecting a single seed variety may involve serious selection bias. A two‐stage procedure which adjusts for selectivity bias is used to estimate the model with farm‐level data from Java.