Investment rigidity and policy measures

Teresa Serra, Spiro Stefanou, Jose Maria Gil and Allen Featherstone

No 6511, 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: This paper assesses the impacts of decoupled government transfers on production decisions of a sample of Kansas farms observed from 1996 to 2001. Our model allows for risk, risk attitudes and the intertemporal investment decisions. We also allow for different adjustments of the decision variables depending on the predominant economic conditions. The theoretical model is estimated using the threshold regression methods proposed by Hansen (1999). Threshold effects are allowed to characterize the behavior of output supply and quasi-fixed and variable input demand.. The econometric results support the existence of three regimes characterized by different economic behavior. Our analysis suggests that in a dynamic setting with risk and non-risk neutral economic agents, decoupled transfers can have a powerful influence on decisions taken by economic agents. The dynamics of the stock of capital cause this influence to grow over time.

Keywords: Farm Management; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 21
Date: 2008
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Citations: View citations in EconPapers (6)

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Journal Article: Investment rigidity and policy measures (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea08:6511

DOI: 10.22004/ag.econ.6511

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