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Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector

  • Brenda L. Boetel
  • Ruben Hoffmann
  • Donald J. Liu

This article addresses the issues of investment/disinvestment asymmetry and a possible existence of a sluggish regime in the demand for a quasi-fixed input in the U.S. hog production sector. Adopting a new threshold estimation procedure, quarterly data from 1970 through 2002 are used to estimate a regime-dependent investment demand equation for a quasi-fixed input, taking sows as a proxy. The results support the existence of three regimes over alternative specifications precluding the sluggish regime, confirming the existence of asset fixity in hog production. The results also highlight the importance of accounting for investment rigidity when estimating hog supply and variable input demands. Copyright 2007, Oxford University Press.

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File URL: http://hdl.handle.net/10.1111/j.1467-8276.2007.00961.x
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 89 (2007)
Issue (Month): 1 ()
Pages: 36-51

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Handle: RePEc:oup:ajagec:v:89:y:2007:i:1:p:36-51
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  1. Chang, Ching-Cheng & Stefanou, Spiro E., 1988. "Specification and estimation of asymmetric adjustment rates for quasi-fixed factors of production," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 145-151, March.
  2. Matthew T. Holt & Stanley R. Johnson, 1986. "Supply Dynamics in the U.S. Hog Industry," Food and Agricultural Policy Research Institute (FAPRI) Publications 86-wp12, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
  3. Bruce E. Hansen, 1997. "Threshold effects in non-dynamic panels: Estimation, testing and inference," Boston College Working Papers in Economics 365, Boston College Department of Economics.
  4. Mundlak, Yair, 2001. "Production and supply," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 1, pages 3-85 Elsevier.
  5. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  6. Pietola, Kyosti & Myers, Robert J., 1998. "Investment Under Uncertainty And Dynamic Adjustment In Finnish Pork Industry," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20953, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Alfons Oude Lansink & Spiro E. Stefanou, 1997. "Asymmetric Adjustment of Dynamic Factors at the Firm Level," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1340-1351.
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