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A Model of Economic Development for Peasant Farms in Southern Italy

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  • Gerald W. Dean
  • Michele De Benedictis

Abstract

This study uses dynamic linear programming to derive normative development plans through time for small land reform farms in the newly irrigated Metaponto plain of southern Italy. The analysis indicates great potential for internal savings and investment by peasant families and therefore rapid development possibilities for intensive fruit and vegetable cultivation. However, a risk discount of only 16 percent would eliminate orchards from the plans. Government investment in low interest loans and grants for development costs have a high potential return (about 85 percent) on these farms. To facilitate rapid development rates, technological advice to farmers provided by government appears critical. Methodologically, the model maximizes the present value of future returns from annual plans over a 60-year horizon, allowing capital formation and optimum choice between short- and long-term activities. The model could be easily reformulated to solve problems involving optimum timing of replacement of capital assets.

Suggested Citation

  • Gerald W. Dean & Michele De Benedictis, 1964. "A Model of Economic Development for Peasant Farms in Southern Italy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 46(2), pages 295-312.
    • Handle: RePEc:oup:ajagec:v:46:y:1964:i:2:p:295-312.
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    File URL: http://hdl.handle.net/10.2307/1236536
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    Cited by:

    1. Baker, C.B. & Barry, Peter J. & Lee, Warren F. & Olson, Carl E. & Hochman, Eithan & Rausser, Gordon S. & Kottke, Marvin W., 1977. "Economic Growth of the Agricultural Firm," Western Region Archives 260636, Western Region - Western Extension Directors Association (WEDA).
    2. Rae, Allan N., 1970. "Capital Budgeting, Intertemporal Programming Models, With Particular Reference To Agriculture," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 14(1), pages 1-14, June.
    3. Hansen, B.R. & Oborne, G.T., 1985. "Redevelopment of fruit blocks in the riverland region: An intertemporal programming approach," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 27(2), pages 211-222.
    4. Renborg, Ulf, 1970. "Growth of the Agricultural Firm: Problems and Theories," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 38(02), pages 1-51, June.
    5. J.-M. Boussard, 1964. "Les modèles d'offre en France : Vue rapide et critique," Économie rurale, Programme National Persée, vol. 61(1), pages 37-39.
    6. Giardini, Giovanni, 1992. "The reform of the agricultural policy in the European Economic Community: an Italian farm simulation study," ISU General Staff Papers 1992010108000017587, Iowa State University, Department of Economics.

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