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

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  • Arnade, Carlos
  • Gopinath, Munisamy

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.

Suggested Citation

  • Arnade, Carlos & Gopinath, Munisamy, 1996. "Capital Adjustment in U.S. Agriculture and Food Processing: A Cross-Sectoral Model," Staff Reports 278816, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uerssr:278816
    DOI: 10.22004/ag.econ.278816
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    Cited by:

    1. Morrison Paul, Catherine J., 2000. "Productivity And Efficiency In The U.S. Food System, Or, Might Cost Factors Support Increasing Mergers And Concentration?," Working Papers 11983, University of California, Davis, Department of Agricultural and Resource Economics.
    2. Catherine Morrison Paul, 2003. "Productivity and Efficiency Measurement in Our “New Economy”: Determinants, Interactions, and Policy Relevance," Journal of Productivity Analysis, Springer, vol. 19(2), pages 161-177, April.
    3. Shane, Mathew & Roe, Terry L. & Gopinath, Munisamy, 1998. "U.S. Agricultural Growth and Productivity: An Economywide Perspective," Agricultural Economic Reports 34047, United States Department of Agriculture, Economic Research Service.
    4. Gopinath, Munisamy & Carver, Jason, 2002. "Total Factor Productivity And Processed Food Trade: A Cross-Country Analysis," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(2), pages 1-15, December.
    5. Johan Swinnen & Liesbet Vranken, 2010. "Reforms and agricultural productivity in Central and Eastern Europe and the Former Soviet Republics: 1989–2005," Journal of Productivity Analysis, Springer, vol. 33(3), pages 241-258, June.

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