Capital Adjustment in U.S. Agriculture and Food Processing: A Cross-Sectoral Model

Carlos Arnade and Munisamy Gopinath

No 278816, Staff Reports from United States Department of Agriculture, Economic Research Service

Abstract: Significant differences exist in the rates of capital adjustment in the four major sectors (agriculture, food processing, manufacturing, and services) of the U.S. economy. The properties of a quadratic value function from a multi-output adjustment cost model are used to derive dynamic supply and investment demand of 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 longrun equilibrium at a rate of about 2 percent per year. The food processing and services sectors are more flexible in that their capital stocks fully adjust in less than 5 years. Theoretically consistent supply elasticities further validate the results. Strong linkages among the four major sectors of the economy are also identified. The rates of capital adjustment help explain the pattern of capital's contribution to growth in the various sectors of the economy.

Keywords: Agricultural and Food Policy; Demand and Price Analysis (search for similar items in EconPapers)
Pages: 24
Date: 1996-11
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https://ageconsearch.umn.edu/record/278816/files/ers-report-677.pdf (application/pdf)

Related works:
Journal Article: CAPITAL ADJUSTMENT IN U.S. AGRICULTURE AND FOOD PROCESSING: A CROSS-SECTORAL MODEL (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:uerssr:278816

DOI: 10.22004/ag.econ.278816

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