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Measuring Excess Capital Capacity in Agricultural Production

Author

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  • Zhengfei Guan
  • Subal C. Kumbhakar
  • Robert J. Myers
  • Alfons Oude Lansink

Abstract

We introduce the concept “excess capital capacity” and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production. We also propose a two-step estimation method that allows endogenous regressors in stochastic frontier models. The first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors. The second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it. The empirical application to Dutch cash crop farms found varying degrees of excess capital capacity. The policy implications of excess capital capacity are discussed. Copyright 2005, Oxford University Press.

Suggested Citation

  • Zhengfei Guan & Subal C. Kumbhakar & Robert J. Myers & Alfons Oude Lansink, 2005. "Measuring Excess Capital Capacity in Agricultural Production," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 765-776.
    • Handle: RePEc:oup:ajagec:v:91:y:2005:i:3:p:765-776
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2009.01271.x
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    Cited by:

    1. Fabio Pieri & Enrico Zaninotto, 2010. "The Impact of Vertical Integration and Outsourcing on Firm Efficiency: Evidence from the Italian Machine Tool Industry," DISA Working Papers 1001, Department of Computer and Management Sciences, University of Trento, Italy, revised 11 Mar 2010.
    2. Jakob Vesterlund Olsen & Arne Henningsen, 2011. "Investment Utilisation, Adjustment Costs, and Technical Efficiency in Danish Pig Farms," IFRO Working Paper 2011/13, University of Copenhagen, Department of Food and Resource Economics.
    3. Mustafa U. Karakaplan & Levent Kutlu, 2019. "Estimating market power using a composed error model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 66(4), pages 489-510, September.
    4. Petrick, Martin & Kloss, Mathias, 2012. "Drivers of agricultural capital productivity in selected EU member states," Working papers 132838, Factor Markets, Centre for European Policy Studies.

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