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Borrowing constraints and the agricultural investment decision process

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  • Luciano Gutierrez

    (Department of Agricultural Economics, University of Sassari, 07100 Sassari, Italy)

Abstract

This paper develops a dynamic intertemporal model under the hypothesis of asymmetric information for the analysis of the rate of investment in the agricultural sector. The model stresses the importance of borrowing constraints for the investment decision of firms. Using the model we derive, following Abel and Blanchard's (1986) approach, an estimate for marginal Tobin's Q. We find that this series is positively and strongly related to the agricultural rate of investment in Italy during the period of 1960-1996. [Econ-Lit Citations: Q14, E62, E22] © 2002 Wiley Periodicals, Inc.

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File URL: http://hdl.handle.net/10.1002/agr.10008
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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 18 (2001)
Issue (Month): 1 ()
Pages: 101-114

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Handle: RePEc:wly:agribz:v:18:y:2001:i:1:p:101-114

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Nelson, Charles R & Kang, Heejoon, 1981. "Spurious Periodicity in Inappropriately Detrended Time Series," Econometrica, Econometric Society, vol. 49(3), pages 741-51, May.
  2. Andrew B. Abel & Olivier J. Blanchard, 1987. "The Present Value of Profits and Cyclical Movements in Investment," NBER Working Papers 1122, National Bureau of Economic Research, Inc.
  3. Tobin, James, 1969. "A General Equilibrium Approach to Monetary Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(1), pages 15-29, February.
  4. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, vol. 50(1), pages 213-24, January.
  5. Freeman, H. A. & Ehui, Simeon K. & A. Jabbar, Mohammad, 1998. "Credit constraints and smallholder dairy production in the East African highlands: application of a switching regression model," Agricultural Economics, Blackwell, vol. 19(1-2), pages 33-44, September.
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Cited by:
  1. Chaddad, Fabio Ribas & Cook, Michael L., 2002. "Testing For The Presence Of Financial Constraints In U.S," Working Papers 26045, University of Missouri Columbia, Department of Agricultural Economics.
  2. Davies, Stephen P. & Erickson, Kenneth W. & Vickner, Steven S. & Hoag, Dana L. & Nehring, Richard F., 2005. "An Error-Components Three-Stage Least-Squares Model of Investment Allocation by Farm Households," 2005 Annual meeting, July 24-27, Providence, RI 19249, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).

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