Switching toward capital‐intensive technologies in Finnish dairy farms

Kyosti Pietola and Anna‐Maija Heikkilä

Agricultural Economics, 2005, vol. 33, issue s3, 381-387

Abstract: We analyze dairy farmers' decisions to switch from the traditional labor‐intensive tied‐housing system to a more capital‐intensive free‐stall housing. The choice of the housing system is modeled as a sequence of interrelated choices. Errors that are consistent with the observed choices are simulated and used to control for serial correlation and farm‐specific fixed effects. The sequence of choices is estimated by the GHK simulation technique and simulated maximum likelihood (SML). The results suggest that the switch toward more capital‐intensive free‐stall housing responds positively and elastically to investment grants and a farmer's capital resources. In addition, positive revenue shocks significantly encourage switches to free‐stall housing.

Date: 2005
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