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Taxation, Cost Of Capital And Investment In Australian Agriculture

Author

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  • Lewis, Philip E.T.
  • Hall, Nigel H.
  • Savage, C.R.
  • Kingston, A.G.

Abstract

The concept and measurement of the cost of capital is developed to include particularly the role of taxation in investment behaviour. The relative importance of factors influencing investment in plant and machinery is examined for five sectors which make up the broadacre industry of Australia. It is shown that residual funds are important in determining plant and machinery investment, but not through the normally hypothesised channels. It is not the increased liquidity from increased income which raises investment, but the fall in the cost of capital, which is associated with the marginal rate of tax.

Suggested Citation

  • Lewis, Philip E.T. & Hall, Nigel H. & Savage, C.R. & Kingston, A.G., 1988. "Taxation, Cost Of Capital And Investment In Australian Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 32(1), pages 1-7, April.
    • Handle: RePEc:ags:ajaeau:22919
    DOI: 10.22004/ag.econ.22919
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    References listed on IDEAS

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    1. Fisher, Brian S., 1974. "A Quarterly Model Of Agricultural Investment In Australia," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 18(1), pages 1-10, April.
    2. Paul A. Samuelson, 1964. "Tax Deductibility of Economic Depreciation to Insure Invariant Valuations," Journal of Political Economy, University of Chicago Press, vol. 72(6), pages 604-604.
    3. Brian S. Fisher, 1974. "A Quarterly Model Of Agricultural Investment In Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 18(1), pages 22-31, April.
    4. Keith O. Campbell, 1958. "Some Reflections On Agricultural Investment," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 2(2), pages 93-103, December.
    5. Campbell, Keith O., 1958. "Some Reflections On Agricultural Investment," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 2(2), pages 1-11, December.
    6. Coen, Robert M, 1975. "Investment Behavior, the Measurement of Depreciation, and Tax Policy," American Economic Review, American Economic Association, vol. 65(1), pages 59-74, March.
    7. Vanzetti, David & Quiggin, John C., 1985. "A Comparative Analysis Of Agricultural Tractor Investment Models," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 29(2), pages 1-20, August.
    8. Fuller, Wayne A. & Battese, George E., 1974. "Estimation of linear models with crossed-error structure," Journal of Econometrics, Elsevier, vol. 2(1), pages 67-78, May.
    9. William McDaniel Herr, 1964. "Capital Formation: Its Importance And Determinants," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 8(2), pages 97-111, December.
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