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Impact of Government Payments, Depreciation and Inflation on Investment Behavior in American Agriculture Sector Using Sample of Kansas Farms

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  • Ariyaratne, Chatura B.
  • Featherstone, Allen M.

Abstract

A farm’s physical investment is affected by its fundamental q and by its financial situation, with the later comprising both the firm’s liquidity and its possibility of facing capital market imperfections. This study determines the effects of government payments, depreciation, and inflation on crop farm machinery and equipment investment behavior employing the Nonlinear Generalized Method of Moment (GMM) estimator to estimate the investment system. The magnitude of the lagged cash flows such as government payments, cash crop income, and grain income were largely responsible for determining farm investment behavior in the Kansas agriculture sector. An increase in lagged machinery and equipment depreciation and lagged farm motor vehicle and listed property depreciation increases total crop farm investment substantially for an average farm. Statistically, there is no evidence of inflation affects on crop farm machinery investment behavior.

Suggested Citation

  • Ariyaratne, Chatura B. & Featherstone, Allen M., 2009. "Impact of Government Payments, Depreciation and Inflation on Investment Behavior in American Agriculture Sector Using Sample of Kansas Farms," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49301, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea09:49301
    DOI: 10.22004/ag.econ.49301
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    File URL: https://ageconsearch.umn.edu/record/49301/files/613324.pdf
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    References listed on IDEAS

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    1. Emanuel Melichar, 1979. "Capital Gains versus Current Income in the Farming Sector," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(5), pages 1085-1092.
    2. Barry W. Bobst & Joe T. Davis, 1987. "Beef Cow Numbers, Crop Acreage, and Crop Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 69(4), pages 771-776.
    3. Ralph Bierlen & Allen M. Featherstone, 1998. "Fundamental q, Cash Flow, and Investment: Evidence from Farm Panel Data," The Review of Economics and Statistics, MIT Press, vol. 80(3), pages 427-435, August.
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    Cited by:

    1. Williamson, James M. & Bawa, Siraj G., 2018. "Estimated Effects of the Tax Cuts and Jobs Act on Farms and Farm Households," Economic Research Report 276226, United States Department of Agriculture, Economic Research Service.
    2. Hadrich, Joleen C. & Larsen, Ryan A. & Olson, Frayne E., 2012. "Incentives for Machinery Investment," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124897, Agricultural and Applied Economics Association.
    3. Bawa, Siraj G. & Williamson, James M., 2017. "Tax Reform and Farm Households," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266294, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    Agribusiness; Agricultural Finance; Crop Production/Industries; Farm Management; Financial Economics; Livestock Production/Industries; Production Economics;
    All these keywords.

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