Capital services in U.S. agriculture: Concepts, comparisons, and the treatment of interest rates

Matt A. Andersen; Julian M. Alston; Philip G Pardey

doi:10.1093/ajae/aar010

Capital services in U.S. agriculture: Concepts, comparisons, and the treatment of interest rates

Matt A. Andersen, Julian M. Alston, Philip G Pardey

Applied Economics

Research output: Contribution to journal › Review article › peer-review

11 Scopus citations

Abstract

This paper begins with a review of the methods and assumptions used to measure capital service flows. Two data series on capital inputs in U.S. agriculture are briefly described and compared. We show that measures of capital services are sensitive to the treatment of interest rates. Notably, the use of fixed versus variable market rates significantly affects measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture, the use of a fixed interest rate generates more plausible estimates than the use of an annual market rate.

Original language	English (US)
Pages (from-to)	714-734
Number of pages	21
Journal	American Journal of Agricultural Economics
Volume	93
Issue number	3
DOIs	https://doi.org/10.1093/ajae/aar010
State	Published - Apr 2011

Bibliographical note

Funding Information:
MattAndersen is an assistant professor in the Department ofAgri-cultural and Applied Economics at the University of Wyoming and a research fellow at the International Science andTechnology Practice and Policy (InSTePP) Center at the University of Minnesota; Julian Alston is a professor in the Department of Agricultural and Resource Economics, University of California, Davis and a member of the Giannini Foundation of Agricultural Economics; and Philip Pardey is a professor in the department of Applied Economics, University of Minnesota and Director of InSTePP. The authors gratefully acknowledge John Smylie and the Association of Equipment Manufacturers for assistance in making data available, and thank Barbara Craig and Eldon Ball for their input, insights and help with access to data. The work for this project was partly supported by the University of California; the University of Minnesota; the University of Wyoming; the USDA’s Economic Research Service, Agricultural Research Service, and CSREES National Research Initiative; and the Giannini Foundation of Agricultural Economics.

Keywords

capital stocks and services
interest rates
rental rates

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title = "Capital services in U.S. agriculture: Concepts, comparisons, and the treatment of interest rates",

abstract = "This paper begins with a review of the methods and assumptions used to measure capital service flows. Two data series on capital inputs in U.S. agriculture are briefly described and compared. We show that measures of capital services are sensitive to the treatment of interest rates. Notably, the use of fixed versus variable market rates significantly affects measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture, the use of a fixed interest rate generates more plausible estimates than the use of an annual market rate.",

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note = "Funding Information: MattAndersen is an assistant professor in the Department ofAgri-cultural and Applied Economics at the University of Wyoming and a research fellow at the International Science andTechnology Practice and Policy (InSTePP) Center at the University of Minnesota; Julian Alston is a professor in the Department of Agricultural and Resource Economics, University of California, Davis and a member of the Giannini Foundation of Agricultural Economics; and Philip Pardey is a professor in the department of Applied Economics, University of Minnesota and Director of InSTePP. The authors gratefully acknowledge John Smylie and the Association of Equipment Manufacturers for assistance in making data available, and thank Barbara Craig and Eldon Ball for their input, insights and help with access to data. The work for this project was partly supported by the University of California; the University of Minnesota; the University of Wyoming; the USDA{\textquoteright}s Economic Research Service, Agricultural Research Service, and CSREES National Research Initiative; and the Giannini Foundation of Agricultural Economics.",

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AB - This paper begins with a review of the methods and assumptions used to measure capital service flows. Two data series on capital inputs in U.S. agriculture are briefly described and compared. We show that measures of capital services are sensitive to the treatment of interest rates. Notably, the use of fixed versus variable market rates significantly affects measures of the quantity and productivity of agricultural capital in the United States. We conclude that when calculating capital usage in U.S. agriculture, the use of a fixed interest rate generates more plausible estimates than the use of an annual market rate.

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KW - rental rates

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Capital services in U.S. agriculture: Concepts, comparisons, and the treatment of interest rates

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Bibliographical note

Keywords

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