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Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector

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  • Brenda L. Boetel
  • Ruben Hoffmann
  • Donald J. Liu

Abstract

This article addresses the issues of investment/disinvestment asymmetry and a possible existence of a sluggish regime in the demand for a quasi-fixed input in the U.S. hog production sector. Adopting a new threshold estimation procedure, quarterly data from 1970 through 2002 are used to estimate a regime-dependent investment demand equation for a quasi-fixed input, taking sows as a proxy. The results support the existence of three regimes over alternative specifications precluding the sluggish regime, confirming the existence of asset fixity in hog production. The results also highlight the importance of accounting for investment rigidity when estimating hog supply and variable input demands. Copyright 2007, Oxford University Press.

Suggested Citation

  • Brenda L. Boetel & Ruben Hoffmann & Donald J. Liu, 2007. "Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(1), pages 36-51.
    • Handle: RePEc:oup:ajagec:v:89:y:2007:i:1:p:36-51
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    Cited by:

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    3. Guastella, G. & Moro, D. & Sckokai, P. & Veneziani, M., 2013. "CAP Effects on Agricultural Investment Demand in Europe," 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152256, International Agricultural Trade Research Consortium.
    4. Wilson, P. & Glithero, N.J. & Ramsden, S.J., 2014. "Prospects for dedicated energy crop production and attitudes towards agricultural straw use: The case of livestock farmers," Energy Policy, Elsevier, vol. 74(C), pages 101-110.
    5. Georgeanne M. Artz & Zizhen Guo & Peter F. Orazem, 2016. "Location, Location, Location: Place-Specific Human Capital, Rural Firm Entry and Firm Survival," Center for Agricultural and Rural Development (CARD) Publications apr-winter-2016-1, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    6. Guastella, Giovanni & Moro, Daniele & Sckokai, Paolo & Veneziani, Mario, 2013. "Investment behaviour of EU arable crop farms in selected EU countries and the impact of policy reforms," Working papers 152083, Factor Markets, Centre for European Policy Studies.
    7. Teresa Serra & Spiro Stefanou & José M. Gil & Allen Featherstone, 2009. "Investment rigidity and policy measures," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 36(1), pages 103-120, March.
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    9. Delbridge, Timothy A., 2013. "Threshold Effects in Transition to Organic Dairy Production," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150554, Agricultural and Applied Economics Association.
    10. Yu, Ping, 2012. "Likelihood estimation and inference in threshold regression," Journal of Econometrics, Elsevier, vol. 167(1), pages 274-294.
    11. Artz, Georgeanne M. & Eathington, Liesl & Francois, Jasmine & Masinde, Melvin & Orazem, Peter F., 2017. "Sorting into and out of Rural and Urban Retail Markets," ISU General Staff Papers 201709140700001034, Iowa State University, Department of Economics.
    12. Qian, Xiaoyan, 2021. "Production planning and equity investment decisions in agriculture with closed membership cooperatives," European Journal of Operational Research, Elsevier, vol. 294(2), pages 684-699.
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