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Uncertain Land Availability and Investment Decisions: The Case of Dutch Dairy Farms

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  • Eli Feinerman
  • Jack Peerlings

Abstract

Within the EU, uncertainty about the possibility of acquiring land can be quite significant for individual farmers in sectors like dairy farming. Farm‐level investment decisions are commonly made ex‐ante, when the farmer is not certain about the possibility of purchasing land. This possibility is realised only in a future period. In this paper, we have developed and applied a simple two‐period model in which a profit‐maximising farmer, facing uncertainty about the possibility of acquiring land, has to choose the optimal mix of capital (buildings) investment and land endowment. We illustrate the model using data from Dutch dairy farms.

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  • Eli Feinerman & Jack Peerlings, 2005. "Uncertain Land Availability and Investment Decisions: The Case of Dutch Dairy Farms," Journal of Agricultural Economics, Wiley Blackwell, vol. 56(1), pages 59-80, March.
    • Handle: RePEc:bla:jageco:v:56:y:2005:i:1:p:59-80
    DOI: 10.1111/j.1477-9552.2005.tb00122.x
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    References listed on IDEAS

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    1. Abel, Andrew B. & Eberly, Janice C., 1997. "An exact solution for the investment and value of a firm facing uncertainty, adjustment costs, and irreversibility," Journal of Economic Dynamics and Control, Elsevier, vol. 21(4-5), pages 831-852, May.
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    1. Lefebvre, Marianne & Raggi, Meri & Gomez Y Paloma, Sergio & Viaggi, Davide, 2014. "An analysis of the intention-realisation discrepancy in EU farmers’ land investment decisions," Revue d'Etudes en Agriculture et Environnement, Editions NecPlus, vol. 95(01), pages 51-75, March.
    2. 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.
    3. Benedikt Kramer & Anke Schorr & Reiner Doluschitz & Markus Lips, 2021. "The Role of Neighborhood Effects on Investing Dairy Farms," Economia agro-alimentare, FrancoAngeli Editore, vol. 23(3), pages 1-20.
    4. Sergo Gomez i Paloma & Vittorio Galerani & Meri Ragi & Davide Viagi & Dimitar Nikolov, 2008. "Methodological Approach for Evaluation ff Investment Behavior of Farmers in Different Development Scenarios," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 81-96.
    5. 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.

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