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Impact of Government Payments, Depreciation and Inflation on Investment Behavior in American Agriculture Sector Using Sample of Kansas Farms


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  • Ariyaratne, Chatura B.
  • Featherstone, Allen M.


A farm’s physical investment is affected by its fundamental q and by its financial situation, with the later comprising both the firm’s liquidity and its possibility of facing capital market imperfections. This study determines the effects of government payments, depreciation, and inflation on crop farm machinery and equipment investment behavior employing the Nonlinear Generalized Method of Moment (GMM) estimator to estimate the investment system. The magnitude of the lagged cash flows such as government payments, cash crop income, and grain income were largely responsible for determining farm investment behavior in the Kansas agriculture sector. An increase in lagged machinery and equipment depreciation and lagged farm motor vehicle and listed property depreciation increases total crop farm investment substantially for an average farm. Statistically, there is no evidence of inflation affects on crop farm machinery investment behavior.

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Bibliographic Info

Paper provided by Agricultural and Applied Economics Association in its series 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin with number 49301.

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Date of creation: 2009
Date of revision:
Handle: RePEc:ags:aaea09:49301

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Keywords: Investment; Liquidity; fundamental q; government payments; depreciation; inflation; Agribusiness; Agricultural Finance; Crop Production/Industries; Farm Management; Financial Economics; Livestock Production/Industries; Production Economics;

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Cited by:
  1. Hadrich, Joleen C. & Larsen, Ryan A. & Olson, Frayne E., 2012. "Incentives for Machinery Investment," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124897, Agricultural and Applied Economics Association.


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