Measuring Excess Capital Capacity in Agricultural Production

12 Pages Posted: 28 Apr 2020

See all articles by Zhengfei Guan

Zhengfei Guan

Michigan State University - College of Agriculture and Natural Resources

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics

Robert J. Myers

Michigan State University - Department of Agricultural Economics

Alfons Oude Lansink

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: August 2009

Abstract

We introduce the concept “excess capital capacity” and employ a stochastic input requirement frontier to measure excess capital capacity in agricultural production. We also propose a two‐step estimation method that allows endogenous regressors in stochastic frontier models. The first step uses generalized method of moments to get consistent estimates of the frontier parameters in the presence of endogenous regressors. The second step uses maximum likelihood to measure excess capital capacity and evaluate the factors that influence it. The empirical application to Dutch cash crop farms found varying degrees of excess capital capacity. The policy implications of excess capital capacity are discussed.

Keywords: endogenous regressors, excess capital capacity, GMM, stochastic frontier

Suggested Citation

Guan, Zhengfei and Kumbhakar, Subal C. and Myers, Robert J. and Lansink, Alfons Oude, Measuring Excess Capital Capacity in Agricultural Production (August 2009). American Journal of Agricultural Economics, Vol. 91, Issue 3, pp. 765-776, 2009, Available at SSRN: https://ssrn.com/abstract=3585815 or http://dx.doi.org/10.1111/j.1467-8276.2009.01271.x

Zhengfei Guan (Contact Author)

Michigan State University - College of Agriculture and Natural Resources

East Lansing, MI
United States

Subal C. Kumbhakar

State University of New York (SUNY) at Binghamton - Department of Economics ( email )

Binghamton, NY 13902-6000
United States

Robert J. Myers

Michigan State University - Department of Agricultural Economics ( email )

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

Alfons Oude Lansink

affiliation not provided to SSRN

No Address Available

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