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Capital Services in U.S. Agriculture: Concepts, Comparisons, and the Treatment of Interest Rates

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  • Andersen, Matthew A.
  • Alston, Julian M.
  • Pardey, Philip G.

Abstract

Measures of capital services are used in studies of production and to inform policies related to growth and development. A variety of methods have been used to measure capital stocks and service flows. We briefly review the methods commonly used to measure capital service flows, and the main assumptions. We then quantify the substantial differences between our newly constructed InSTePP series on capital use in U.S. agriculture and a comparable USDA series. We show that measures of capital services are sensitive to the treatment of interest rates, notably the use of fixed versus variable market rates, and we demonstrate the implications for measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture the use of a fixed rate of interest will generate more plausible estimates than the use of an annual market rate that varies from year to year.

Suggested Citation

  • Andersen, Matthew A. & Alston, Julian M. & Pardey, Philip G., 2010. "Capital Services in U.S. Agriculture: Concepts, Comparisons, and the Treatment of Interest Rates," Staff Papers 92801, University of Minnesota, Department of Applied Economics.
  • Handle: RePEc:ags:umaesp:92801
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    File URL: http://ageconsearch.umn.edu/record/92801/files/Staff%20Paper%20P10-6--InSTePP10-02.pdf
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    References listed on IDEAS

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    1. Christopher J. O'Donnell & C. Richard Shumway & V. Eldon Ball, 1999. "Input Demands and Inefficiency in U.S. Agriculture," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 865-880.
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    Cited by:

    1. Petrick, Martin & Kloss, Mathias, 2012. "Drivers of agricultural capital productivity in selected EU member states," Factor Markets Working Papers 137, Centre for European Policy Studies.

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    Agricultural Finance;

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