A Dynamic Model of Investment in the U.S. Beef-Cattle Industry

Reproduction constraints lead to some a priori information that may prove valuable in econo- metrically modeling inventory dynamics within the U.S. cattle herd. The distributed-lag models estimated for animal inventories suggest an implicit incorporation of the age distribution of the herd that is crucial to understanding the retention/culling (investment) decisions. The estimated equations are validated using post-sample observations that were withheld prior to estimation. The final-form dynamic equations have complex roots and protracted price and investment effects. The parameter estimates are used to calculate intermediate and long-run elasticities at the means of relevant variables.