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Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector
Author(s) -
Boetel Brenda L.,
Hoffmann Ruben,
Liu Donald J.
Publication year - 2007
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2007.00961.x
Subject(s) - disinvestment , economics , rigidity (electromagnetism) , econometrics , investment (military) , proxy (statistics) , microeconomics , production (economics) , asymmetry , variable (mathematics) , mathematics , statistics , mathematical analysis , physics , structural engineering , quantum mechanics , politics , political science , law , engineering , incentive
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.