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Investment rigidity and policy measures

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  • Teresa Serra
  • Spiro Stefanou
  • José M. Gil
  • Allen Featherstone

Abstract

This paper assesses the impacts of decoupled government transfers on production decisions of a sample of Kansas farms. Our empirical analysis is based on a reduced-form application of the dual model of investment under uncertainty developed by Sckokai, which is extended to a consideration of irregularities in the capital stock adjustment cost function. To do so we adopt the threshold regression methods proposed by Hansen. The econometric results support the existence of three regimes characterised by different economic behaviour. Our analysis suggests that in a dynamic setting that allows for irregularities in the capital adjustment cost function, decoupled transfers can have a powerful influence on production decisions. The dynamics of the stock of capital cause this influence to grow over time. Oxford University Press and Foundation for the European Review of Agricultural Economics 2009; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org, Oxford University Press.

Suggested Citation

  • Teresa Serra & Spiro Stefanou & José M. Gil & Allen Featherstone, 2009. "Investment rigidity and policy measures," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 36(1), pages 103-120, March.
  • Handle: RePEc:oup:erevae:v:36:y:2009:i:1:p:103-120
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    1. repec:ags:aaea13:150610 is not listed on IDEAS
    2. Guastella, G. & Moro, D. & Sckokai, P. & Veneziani, M., 2013. "CAP Effects on Agricultural Investment Demand in Europe," 2013 Second Congress, June 6-7, 2013, Parma, Italy 149758, Italian Association of Agricultural and Applied Economics (AIEAA).
    3. Feil, Jan-Henning & Musshoff, Oliver, 2012. "Policy Impact Analysis on Investments and Disinvestments under Competition: A Real Options Approach," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124294, Australian Agricultural and Resource Economics Society.
    4. Delbridge, Timothy A., 2013. "Threshold Effects in Transition to Organic Dairy Production," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150554, Agricultural and Applied Economics Association.
    5. Stutzman, Sarah A., 2016. "U.S. Farm Capital Investment 1996-2013: Differences by Farm Size and Operator Primary Occupation," Dissertations-Doctoral 235179, AgEcon Search.
    6. Supawat Rungsuriyawiboon & Heinrich Hockmann, 2015. "Adjustment costs and efficiency in Polish agriculture: a dynamic efficiency approach," Journal of Productivity Analysis, Springer, vol. 44(1), pages 51-68, August.
    7. Mary, Sebastien & Santini, Fabien & Boulanger, Pierre, 2013. "An Ex-Ante Assessment of CAP Income Stabilisation Payments using a Farm Household Model," 87th Annual Conference, April 8-10, 2013, Warwick University, Coventry, UK 158860, Agricultural Economics Society.
    8. Viaggi, Davide & Raggi, Meri & Gomez y Paloma, Sergio, 2011. "Farm-household investment behaviour and the CAP decoupling: Methodological issues in assessing policy impacts," Journal of Policy Modeling, Elsevier, vol. 33(1), pages 127-145, January.
    9. Alexandre Gohin & Yu Zheng, 2016. "Assessing the Decoupling of EU Agricultural Policy on Farm Decisions - A Dynamic Stochastic Attempt," FOODSECURE Working papers 45, LEI Wageningen UR.
    10. Petrick, Martin & Zier, Patrick, 2010. "Cap Impacts On Labour Use In East German Agriculture," 50st Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93962, German Association of Agricultural Economists (GEWISOLA).
    11. 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.
    12. Guastella, Giovanni & Veneziani, Mario & Sckokai, Paolo & Moro, Daniele, 2013. "Simulation Results on the Impact of Changes in the Main EU Policy Tools on Farm Investment Behaviour," Working Papers 157115, Factor Markets, Centre for European Policy Studies.
    13. Guastella, Giovanni & Moro, Daniele & Sckokai, Paolo & Veneziani, Mario, 2013. "Investment behaviour of EU arable crop farms in selected EU countries and the impact of policy reforms," Working Papers 152083, Factor Markets, Centre for European Policy Studies.
    14. O’Toole, Conor & Hennessy, Thia, 2015. "Do decoupled payments affect investment financing constraints? Evidence from Irish agriculture," Food Policy, Elsevier, vol. 56(C), pages 67-75.
    15. 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.
    16. Zein Kallas & Teresa Serra & José M. Gil, 2011. "Effects Of Policy Instruments On Farm Investments And Production Decisions In The Spanish Cop Sector," Post-Print hal-00712381, HAL.
    17. Esposti, Roberto, 2015. "To match, not to matchm how to match: Estimating the farm-level impact of the 2005 CAP-first pillar reform," 2015 Conference, August 9-14, 2015, Milan, Italy 211625, International Association of Agricultural Economists.

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