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CAPITAL ADJUSTMENT IN U.S. AGRICULTURE AND FOOD PROCESSING: A CROSS-SECTORAL MODEL

Carlos Arnade and Munisamy Gopinath

Journal of Agricultural and Resource Economics, 1998, vol. 23, issue 1, 14

Abstract: Significant differences exist in the rates of capital adjustment in the four major sectors of the U.S. economy: agriculture, food, manufacturing, and services. A multioutput adjustment cost model is specified to compute the rates of capital adjustment. This specification allows us to derive dynamic output supply and investment demand functions for the four sectors, which are then fitted to time-series data. Our estimates show that capital in agriculture and manufacturing is almost fixed and adjusts toward respective long-run equilibrium at a rate of about 2% per year. The food processing and services sectors are more flexible in that their capital stocks fully adjust in less than five years. Thus, the rate of adjustment of agricultural capital is lower than that of other sectors in the U.S. economy.

Keywords: Agricultural; Finance (search for similar items in EconPapers)
Date: 1998
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Working Paper: Capital Adjustment in U.S. Agriculture and Food Processing: A Cross-Sectoral Model (1996) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ags:jlaare:31167

DOI: 10.22004/ag.econ.31167

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