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Incentives for Machinery Investment

Author

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  • Hadrich, Joleen C.
  • Larsen, Ryan A.
  • Olson, Frayne E.

Abstract

Machinery investment directly effects agricultural production efficiency and profitability. Machinery investment decisions are a function of tax policy, financial, and structural characteristics. This study uses a double hurdle model to determine the factors that affect the decision to purchase machinery as well as the intensity of the machinery purchase. Results indicate that depreciation expense, type of farm, experience, and tax policy are significant determinants in the decision to purchase machinery and the level of machinery purchased.

Suggested Citation

  • 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.
    • Handle: RePEc:ags:aaea12:124897
    DOI: 10.22004/ag.econ.124897
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    References listed on IDEAS

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    1. Peter J. Barry & Ralph W. Bierlen & Narda L. Sotomayor, 2000. "Financial Structure of Farm Businesses under Imperfect Capital Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 82(4), pages 920-933.
    2. Micheels, Eric T. & Katchova, Ani L. & Barry, Peter J., 2004. "Machinery Investment in Illinois: A Study Examining Existing Investment Motivations," 2004 Annual meeting, August 1-4, Denver, CO 20374, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    4. LeBlanc, Michael & Hrubovcak, James & Durst, Ron L. & Conway, Roger K., 1992. "Farm Machinery Investment And The Tax Reform Act Of 1986," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(1), pages 1-14, July.
    5. Gustafson, Cole R. & Barry, Peter J. & Sonka, Steven T., 1988. "Machinery Investment Decisions: A Simulated Analysis For Cash Grain Farms," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(2), pages 1-10, December.
    6. 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.
    7. William J. Burke, 2009. "Fitting and interpreting Cragg's tobit alternative using Stata," Stata Journal, StataCorp LP, vol. 9(4), pages 584-592, December.
    8. 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. Shockley, Jordan M. & Osborne, William A. & Dillon, Carl R. & Pierce, Jerry S., 2016. "A Two-Tiered Benchmarking Analysis for Cost Management," Journal of the ASFMRA, American Society of Farm Managers and Rural Appraisers, vol. 2015, pages 1-14.

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    Keywords

    Agribusiness; Productivity Analysis;

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