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Investment Spikes in Dutch Horticulture: An Analysis at Firm and Aggregate Firm Level Over the Period 1975-1999

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  • Goncharova, Natalia V.
  • Oskam, Arie J.
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    Abstract

    An intermittent and lumpy pattern of investments is observed in the Dutch horticulture sector: only 16.5% of firms experience of investment spike, but they account for 67.7% of total investment. The objective of this paper is to examine the impact of time-varying and time-invariant variables on the probability of observing an investment spieke. This paper investigates the spells between investment spikes in a discrete-time proportional hazard framework. Duration models were estimated on two data sets: on an unbalanced panel and on a grouped into 10 groups data of Dutch glasshouse firms over the period 1975-1999. Different specifications of the model were estimated. Theoretically based model can sufficiently explain the occurrence of investment spikes. Both models show a 6- year period of investment spikes that is also confirmed for the average firm which exhibits a higher hazard ratio in the 6th, 12-13th and 19-20th years of duration. The presence of investment cycle can demonstrate the long-run policy of firms in presence of non-convex adjustment costs. The panel-data models are augmented with a Gamma distribution to account for unobserved heterogeneity among firms.

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    Bibliographic Info

    Paper provided by International Association of Agricultural Economists in its series 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia with number 25621.

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    Date of creation: 2006
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    Handle: RePEc:ags:iaae06:25621

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    Related research

    Keywords: Investments; discrete-hazard duration model; Dutch greenhouse horticulture; gamma heterogeneity; Crop Production/Industries; Q12; D9;

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    1. Jovanovic, B., 1998. "Vintage Capital and Equality," Working Papers 98-16, C.V. Starr Center for Applied Economics, New York University.
    2. Oude Lansink, Alfons G.J.M. & Pietola, Kyosti, 2002. "Semi-Parametric Modeling of Investments in Energy Installations," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24813, European Association of Agricultural Economists.
    3. Russell Cooper & John Haltiwanger & Laura Power, 1995. "Machine Replacement and the Business Cycle: Lumps and Bumps," Papers 0062, Boston University - Industry Studies Programme.
    4. Andrew B. Abel & Janice C. Eberly, 1997. "The Mix and Scale of Factors with Irreversibility and Fixed Costs of Investment," NBER Working Papers 6148, National Bureau of Economic Research, Inc.
    5. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," NBER Working Papers 6416, National Bureau of Economic Research, Inc.
    6. Andrew B. Abel & Janice B. Eberly, . "The Effects of Irreversibility and Uncertainty on Capital Accumulation," Rodney L. White Center for Financial Research Working Papers 21-95, Wharton School Rodney L. White Center for Financial Research.
    7. Davidson, Russell & Harris, Richard, 1981. "Non-Convexities in Continuous-Time Investment Theory," Review of Economic Studies, Wiley Blackwell, vol. 48(2), pages 235-53, April.
    8. Elhorst, J Paul, 1993. "The Estimation of Investment Equations at the Farm Level," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(2), pages 167-82.
    9. Øivind Anti Nilsen & Fabio Schiantarelli, 2003. "Zeros and Lumps in Investment: Empirical Evidence on Irreversibilities and Nonconvexities," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1021-1037, November.
    10. Van den Berg, Gerard J., 2000. "Duration Models: Specification, Identification, and Multiple Durations," MPRA Paper 9446, University Library of Munich, Germany.
    11. repec:fth:starer:9816 is not listed on IDEAS
    12. Jaap H. Abbring & Gerard J. Van Den Berg, 2007. "The unobserved heterogeneity distribution in duration analysis," Biometrika, Biometrika Trust, vol. 94(1), pages 87-99.
    13. Stephen P. Jenkins, 1998. "Discrete time proportional hazards regression," Stata Technical Bulletin, StataCorp LP, vol. 7(39).
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