A METHOD FOR ESTIMATING THE DEMAND FOR AGRICULTURAL MACHINERY IN THE UK

In this paper an investment demand function is estimated, making use of some particular characteristics of data on the sales of agricultural equipment in the UK. The characteristics are that, first, much of agricultural equipment is deliverable quickly from stock and does not appear to be supply-constrained, thus allowing equality of actual and desired capital stocks as a working hypothesis. Second, frequent replacement of machinery leads to depreciation rates which are high and variable. A method is presented to calculate a variable depreciation rate for each period and the resulting estimates are superior to the same model with a conventional, fixed depreciation rate.