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Investment rigidity and policy measures

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  • Teresa Serra
  • Spiro Stefanou
  • José M. Gil
  • Allen Featherstone

Abstract

This paper assesses the impacts of decoupled government transfers on production decisions of a sample of Kansas farms. Our empirical analysis is based on a reduced-form application of the dual model of investment under uncertainty developed by Sckokai, which is extended to a consideration of irregularities in the capital stock adjustment cost function. To do so we adopt the threshold regression methods proposed by Hansen. The econometric results support the existence of three regimes characterised by different economic behaviour. Our analysis suggests that in a dynamic setting that allows for irregularities in the capital adjustment cost function, decoupled transfers can have a powerful influence on production decisions. The dynamics of the stock of capital cause this influence to grow over time. Oxford University Press and Foundation for the European Review of Agricultural Economics 2009; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.

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  • 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.
    • Handle: RePEc:oup:erevae:v:36:y:2009:i:1:p:103-120
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    Cited by:

    1. Fabienne Femenia & Laure Latruffe & Jean-Paul Chavas, 2021. "Responsiveness of farm investment to price changes: evidence from the French crop sector," Applied Economics, Taylor & Francis Journals, vol. 53(34), pages 3972-3983, July.
    2. Supawat Rungsuriyawiboon & Heinrich Hockmann, 2015. "Adjustment costs and efficiency in Polish agriculture: a dynamic efficiency approach," Journal of Productivity Analysis, Springer, vol. 44(1), pages 51-68, August.
    3. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    4. Dakpo, K Hervé & Desjeux, Yann & Jeanneaux, Philippe & Latruffe, Laure, 2016. "Productivity, efficiency and technological change in French agriculture during 2002-2014: A Färe-Primont index decomposition," 149th Seminar, October 27-28, 2016, Rennes, France 244793, European Association of Agricultural Economists.
    5. Guastella, Giovanni & Moro, Daniele & Sckokai, Paolo & Veneziani, Mario, 2013. "Simulation Results on the Impact of Changes in the Main EU Policy Tools on Farm Investment Behaviour," Factor Markets Working Papers 168, Centre for European Policy Studies.
    6. Zein Kallas & Teresa Serra & Jos頠 M. Gil, 2012. "Effects of policy instruments on farm investments and production decisions in the Spanish COP sector," Applied Economics, Taylor & Francis Journals, vol. 44(30), pages 3877-3886, October.
    7. Carpentier, Alain & Gohin, Alexandre & Sckokai, Paolo & Thomas, Alban, 2015. "Economic modelling of agricultural production: past advances and new challenges," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 96(01), pages 131-165, March.
    8. Alexandre Gohin & Yu Zheng, 2016. "Assessing the Decoupling of EU Agricultural Policy on Farm Decisions - A Dynamic Stochastic Attempt," FOODSECURE Working papers 45, LEI Wageningen UR.
    9. Ihli, Hanna Julia & Gassner, Anja & Musshoff, Oliver, 2018. "Experimental insights on the investment behavior of small-scale coffee farmers in central Uganda under risk and uncertainty," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 75(C), pages 31-44.
    10. Petrick, Martin & Zier, Patrick, 2010. "Cap Impacts On Labour Use In East German Agriculture," 50th Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93962, German Association of Agricultural Economists (GEWISOLA).
    11. 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.
    12. Czubak, Wawrzyniec & Pawłowski, Krzysztof Piotr & Sadowski, Arkadiusz, 2021. "Outcomes of farm investment in Central and Eastern Europe: The role of financial public support and investment scale," Land Use Policy, Elsevier, vol. 108(C).
    13. Mary, Sebastien & Santini, Fabien & Boulanger, Pierre, 2013. "An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158860, Agricultural Economics Society.
    14. 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.
    15. Esposti, Roberto, 2015. "To match, not to matchm how to match: Estimating the farm-level impact of the 2005 CAP-first pillar reform," 2015 Conference, August 9-14, 2015, Milan, Italy 211625, International Association of Agricultural Economists.
    16. repec:ags:aaea13:150610 is not listed on IDEAS
    17. Feil, Jan-Henning & Musshoff, Oliver, 2012. "Policy Impact Analysis on Investments and Disinvestments under Competition: A Real Options Approach," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124294, Australian Agricultural and Resource Economics Society.
    18. 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.
    19. O’Toole, Conor & Hennessy, Thia, 2015. "Do decoupled payments affect investment financing constraints? Evidence from Irish agriculture," Food Policy, Elsevier, vol. 56(C), pages 67-75.
    20. Femenia, Fabienne & Latruffe, Laure & Chavas, Jean-Paul, 2017. "Responsiveness of farm investment to price changes: An empirical study of the French crop sector," 2017 International Congress, August 28-September 1, 2017, Parma, Italy 261421, European Association of Agricultural Economists.
    21. Dakpo, K Hervé & Desjeux, Yann & Jeanneaux, Philippe & Latruffe , Laure, 2017. "Productivity, technical efficiency and technological change in French agriculture during 2002-2014: A Färe-Primont index decomposition," Working Papers 263010, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    22. Moro, Daniele & Sckokai, Paolo, 2013. "The impact of decoupled payments on farm choices: Conceptual and methodological challenges," Food Policy, Elsevier, vol. 41(C), pages 28-38.

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