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Measuring Excess Capital Capacity in Agricultural Production
Author(s) -
Guan Zhengfei,
Kumbhakar Subal C.,
Myers Robert J.,
Lansink Alfons Oude
Publication year - 2009
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.1467-8276.2009.01271.x
Subject(s) - economics , econometrics , capital (architecture) , production (economics) , capacity utilization , frontier , measure (data warehouse) , estimation , agriculture , physical capital , microeconomics , human capital , computer science , economic growth , geography , management , archaeology , database
We introduce the concept “excess capital capacity” and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production. We also propose a two‐step estimation method that allows endogenous regressors in stochastic frontier models. The first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors. The second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it. The empirical application to Dutch cash crop farms found varying degrees of excess capital capacity. The policy implications of excess capital capacity are discussed.