Estimating investment rigidity within a threshold regression framework: The case of U.S. hog production sector

Brenda L. Boetel, Ruben Hoffmann, Donald J. Liu

Research output: Contribution to journalArticlepeer-review

16 Scopus citations

Abstract

This article addresses the issues of investment/disinvestment asymmetry and a possible existence of a sluggish regime in the demand for a quasi-fixed input in the U.S. hog production sector. Adopting a new threshold estimation procedure, quarterly data from 1970 through 2002 are used to estimate a regime-dependent investment demand equation for a quasi-fixed input, taking sows as a proxy. The results support the existence of three regimes over alternative specifications precluding the sluggish regime, confirming the existence of asset fixity in hog production. The results also highlight the importance of accounting for investment rigidity when estimating hog supply and variable input demands.

Original languageEnglish (US)
Pages (from-to)36-51
Number of pages16
JournalAmerican Journal of Agricultural Economics
Volume89
Issue number1
DOIs
StatePublished - Feb 2007

Bibliographical note

Funding Information:
Senior authorship is not assigned. Funding for this project was provided by the Minnesota Agricultural Experiment Station (MIN-14-057). The authors also wish to acknowledge the generous support for travel for Ruben Hoffmann from the Center for International Food and Agricultural Policy, University of Minnesota.

Keywords

  • Asset fixity
  • Inaction regime
  • Investment asymmetry
  • Threshold model

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