Agricultural Investment Using Dynamic Models

The purpose of this book is to develop an appropriate model for analyzing the effects of decoupling payments non-government income and wealth on agricultural investment. The conceptual framework informing the research is an improved Dynamic ex-ante Input Demand (DEID) model that was built on the basis of the cost of adjustment theory. In the DEID model a general investment framework is presented where quasi-fixed inputs adjust to a new optimal position at a constant rate when input prices change under production uncertainty. The DEID model introduced in this book considers the effects of production uncertainty in dynamic investment models using the ex-ante cost and ex-ante supply functions. This book includes a review of duality theory the cost minimization approach static and dynamic models adjustment cost hypothesis ex-ante and ex-post cost functions as well as definitions and implementation of decoupling payments. An improved theoretical dynamic model and econometric specification of DEID is presented.