Investment rigidity and policy measures

Teresa Serra, Spiro Stefanou, José M. Gil, Allen Featherstone

Research output: Contribution to journalArticlepeer-review


This paper assesses the impacts of decoupled government transfers on production decisions of a sample of Kansas farms. Our mpirical analysis is based on a reduced-form application of the dual model of investment under uncertainty developed by Sckokai, which is extended to a consideration of irregularities in the capital stock adjustment cost function. To do so we adopt the threshold regression methods proposed by Hansen. The econometric results support the existence of three regimes characterised by different economic behaviour. Our analysis suggests that in a dynamic setting that allows for irregularities in the capital adjustment cost function, decoupled transfers can have a powerful influence on production decisions. The dynamics of the stock of capital cause this influence to grow over time.

Original languageEnglish (US)
Article numberjbp010
Pages (from-to)103-120
Number of pages18
JournalEuropean Review of Agricultural Economics
Issue number1
StatePublished - Mar 2009
Externally publishedYes


  • Decoupling
  • Investment
  • Threshold behaviour

ASJC Scopus subject areas

  • Agricultural and Biological Sciences (miscellaneous)
  • Economics and Econometrics


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