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Succession and investment in New Zealand farming

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  • William Wright
  • P Brown

Abstract

Farms in New Zealand are traditionally run as family businesses in which land and capital are handed down from one generation to the next. Such family businesses have time horizons that are measured in generations rather than years, and the identification of a successor encourages long-term planning that farms without successors cannot justify. Simultaneously, farms that invest in productive capital have higher future earnings potential, ceteris paribus, and therefore be more attractive to potential successors. Both of these relationships imply a correlation between succession planning and investment. In this paper we separate the causal effect succession planning has on investment using two-stage ordered probit regression with instrumental variables, namely, the extent farmers report they farm due to family tradition and the number of generations that the family has farmed in New Zealand. Our results show that the presence of a successor does in fact raise investment.

Suggested Citation

  • William Wright & P Brown, 2019. "Succession and investment in New Zealand farming," New Zealand Economic Papers, Taylor & Francis Journals, vol. 53(2), pages 203-214, May.
    • Handle: RePEc:taf:nzecpp:v:53:y:2019:i:2:p:203-214
    DOI: 10.1080/00779954.2017.1419501
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    Cited by:

    1. Muñoz-Ulecia, E. & Bernués, A. & Casasús, I. & Olaizola, A.M. & Lobón, S. & Martín-Collado, D., 2021. "Drivers of change in mountain agriculture: A thirty-year analysis of trajectories of evolution of cattle farming systems in the Spanish Pyrenees," Agricultural Systems, Elsevier, vol. 186(C).
    2. Agnieszka Strzelecka & Danuta Zawadzka, 2023. "Savings as a Source of Financial Energy on the Farm—What Determines the Accumulation of Savings by Agricultural Households? Model Approach," Energies, MDPI, vol. 16(2), pages 1-18, January.
    3. Pardeshi, Shefali & Loughrey, Jason & O’Connor, Declan, 2024. "Farm Investment and Adoption of Fixed Milk Price Contracts on Irish Dairy Farms," IAAE 2024 Conference, August 2-7, 2024, New Delhi, India 344291, International Association of Agricultural Economists (IAAE).
    4. Danuta Zawadzka & Agnieszka Strzelecka & Ewa Szafraniec-Siluta, 2021. "Debt as a Source of Financial Energy of the Farm—What Causes the Use of External Capital in Financing Agricultural Activity? A Model Approach," Energies, MDPI, vol. 14(14), pages 1-17, July.

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