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

Matt A. Andersen, Julian Alston and Philip Pardey

American Journal of Agricultural Economics, 2010, vol. 93, issue 3, 714-734

Abstract: This paper begins with a review of the methods and assumptions used to measure capital service flows. Two data series on capital inputs in U.S. agriculture are briefly described and compared. We show that measures of capital services are sensitive to the treatment of interest rates. Notably, the use of fixed versus variable market rates significantly affects 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 interest rate generates more plausible estimates than the use of an annual market rate. Copyright 2010, Oxford University Press.

Date: 2010
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