Estimating Investment Rigidity within a Threshold Regression Framework: The Case of U.S. Hog Production Sector |
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| Authors: | Brenda L Boetel Ruben Hoffmann Donald J Liu |
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| Institution: | Brenda L. Boetel is assistant professor in the Department of Agricultural Economics at the University of Wisconsin-River Falls;Ruben Hoffmann is a researcher in the Department of Economics at the Swedish University of Agricultural Sciences;Donald J. Liu is associate professor in the Department of Applied Economics at the University of Minnesota. |
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| 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. |
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| Keywords: | asset fixity inaction regime investment asymmetry threshold model |
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