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CAP Effects on Agricultural Investment Demand in Europe

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  • Guastella, G.
  • Moro, D.
  • Sckokai, P.
  • Veneziani, M.

Abstract

The paper develops a comparative analysis, among selected European Union Member States, of the investment demand, for farm buildings and machinery and equipment, of a sample of specialised arable crop farms as determined - inter alia - by different types and levels of Common Agricultual Policy (CAP) support. The empirical analysis investigates the role of long and short run determinants of investment levels as well as accounts for the presence of irregularities in the cost adjustment function due to the existence of threshold-type behaviours. Throughout the estimated models a consistent and significant long-run dynamic adjustment towards lower levels of the farms' capital stocks is detected. The effect of CAP support on both types of investments is positive, although seldom significant. The elasticities of average net investment with respect to CAP payments are employed to simulate the effects of the recently proposed, reductions in the Pillar I CAP Direct Payments (DPs). Since these reform options imply, almost exclusively, a reduction in the level of support granted through DPs, simulated effects largely respect the expectation of worsening of the farm investment prospects for both asset types (i.e., a larger negative investment or a smaller positive one). Notable exceptions concern investment in machinery and equipment in France and Italy which improve , irrespectively of the magnitude of the implemented cuts in DPs.
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Suggested Citation

  • Guastella, G. & Moro, D. & Sckokai, P. & Veneziani, M., 2013. "CAP Effects on Agricultural Investment Demand in Europe," Proceedings Issues, 2013: Productivity and Its Impacts on Global Trade, June 2-4, 2013. Seville, Spain 152256, International Agricultural Trade Research Consortium.
  • Handle: RePEc:ags:iatr13:152256
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    References listed on IDEAS

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    Cited by:

    1. Stutzman, Sarah A., 2016. "U.S. Farm Capital Investment 1996-2013: Differences by Farm Size and Operator Primary Occupation," Dissertations-Doctoral 235179, AgEcon Search.

    More about this item

    Keywords

    Agricultural and Food Policy; Demand and Price Analysis; International Relations/Trade;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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