Investment rigidity and policy measures

T. Serra, S.E. Stefanou, J.M. Gil, A. Featherstone

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18 Citations (Scopus)

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
Original languageEnglish
Pages (from-to)103-120
JournalEuropean Review of Agricultural Economics
Volume36
Issue number1
DOIs
Publication statusPublished - 2009

Keywords

  • united-states agriculture
  • asymmetric adjustment
  • threshold cointegration
  • dynamic adjustment
  • asset fixity
  • uncertainty
  • inference
  • models
  • firm
  • decisions

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