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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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Author Info
Goncharova, Natalia
Oskam, Arie J.
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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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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Keywords: Investments; discrete-hazard duration model; Dutch greenhouse horticulture; gamma heterogeneity; Crop Production/Industries; Q12; D9;

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  1. Elhorst, J Paul, 1993. "The Estimation of Investment Equations at the Farm Level," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 20(2), pages 167-82.
  2. Andrew B. Abel & Janice C. Eberly, 1995. "The Effects of Irreversibility and Uncertainty on Capital Accumulation," NBER Working Papers 5363, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Stephen P. Jenkins, 1998. "Discrete time proportional hazards regression," Stata Technical Bulletin, StataCorp LP, vol. 7(39). [Downloadable!]
  4. Abbring, Jaap H & van den Berg, Gerard J, 2007. "The Unobserved Heterogeneity Distribution in Duration Analysis," CEPR Discussion Papers 6219, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Abel, Andrew B. & Eberly, Janice C., 1998. "The mix and scale of factors with irreversibility and fixed costs of investment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 101-135, June. [Downloadable!] (restricted)
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  6. Davidson, Russell & Harris, Richard, 1981. "Non-Convexities in Continuous-Time Investment Theory," Review of Economic Studies, Blackwell Publishing, vol. 48(2), pages 235-53, April. [Downloadable!] (restricted)
  7. Van den Berg, Gerard J., 2001. "Duration models: specification, identification and multiple durations," Handbook of Econometrics, in: J.J. Heckman & E.E. Leamer (ed.), Handbook of Econometrics, edition 1, volume 5, chapter 55, pages 3381-3460 Elsevier. [Downloadable!] (restricted)
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  8. 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, December. [Downloadable!] (restricted)
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  9. Lansink, Alfons Oude & 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. [Downloadable!]
  10. Russell Cooper & John Haltiwanger & Laura Power, 1999. "Machine Replacement and the Business Cycle: Lumps and Bumps," American Economic Review, American Economic Association, vol. 89(4), pages 921-946, September. [Downloadable!] (restricted)
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