Investment Under Uncertainty and Dynamic Adjustment in the Finnish Pork Industry

12 Pages Posted: 24 Mar 2020

See all articles by Kyösti Pietola

Kyösti Pietola

MTT Agrifood Research Institute

Robert J. Myers

Michigan State University - Department of Agricultural Economics

Date Written: November 2000

Abstract

A stochastic dual model of investment under uncertainty is used to investigate structural adjustment in the Finnish hog industry. Value function restrictions are found to be comparable to those in existing dual models assuming deterministic state variables. The model also allows for an asymmetry in investment response during capital expansion and contraction phases. Empirical results show that investments respond negatively to increased uncertainty and that labor adjusts more slowly during contraction phases than during expansions. Results on economies of size, uncertainty effects, and adjustment rigidities have important implications for hog industry response to Finland's entry into the EU.

Keywords: dynamic duality, Finnish hog industry, structural adjustment, uncertainty, G310, Q110, Q180

Suggested Citation

Pietola, Kyösti and Myers, Robert J., Investment Under Uncertainty and Dynamic Adjustment in the Finnish Pork Industry (November 2000). American Journal of Agricultural Economics, Vol. 82, Issue 4, pp. 956-967, 2000, Available at SSRN: https://ssrn.com/abstract=3558102 or http://dx.doi.org/10.1111/0002-9092.00094

Kyösti Pietola (Contact Author)

MTT Agrifood Research Institute

Luutnantintie 13
Helsinki
Finland

Robert J. Myers

Michigan State University - Department of Agricultural Economics ( email )

East Lansing, MI 48824
United States
517-432-3649 (Phone)

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