Factors influencing net investment decision making for a group of lower North Island sheep and beef farmers : a thesis presented in partial fulfilment of the requirements for the degree of Master of Agricultural Economics at Massey University

Author: O'Neil, Paul James

Publisher: Massey University

Type: Thesis

Link to this item using this URL: http://hdl.handle.net/10179/14190

Massey University

Abstract

This study investigated the process of net investment decision-making on a group of New Zealand sheep and beef farmers. A review of previous theoretical and empirical research led to the study's objectives, namely to test that investment decision making on New Zealand farms could be incorporated in two dimensions: the determination of a desired level of capital stock and a description of the rate of adjustment of actual capital stock to the desired level. A study of net investment decision-making was chosen because net investment was seen by policy-makers in the 1970's to be an ingredient in planned growth in output. Information on net investment at the individual farmer level was not, however, available to policy-makers at the time. The study was at the individual farmer level to complement previous reserarch at the macro-level on investment in the New Zealand pastoral sector. An investment model was tested using ordinary least squares combining time-series and cross-section data. The initial specification included individual farm dummy variables to account for cross-sectional differences in net investment decision-making. Later, candidate variables hypothesised as explaining cross-section differences were included in the model. The regression results led support to the study's objective. Demand for desired capital stock was viewed as determined by Government policy measures, farm size, farmer age and the initial development state of the farm. Adjustment of actual capital stock to the desired level was viewed as determined by the level of cash at the beginning of each period and windfall gains or losses in net income in the current period. The results provide some basis for the better targeting of future policy measures to the farm sector. The study was limited by lack of a priori knowledge of inter-farm differences in the desire for capital, by the lack of a precise measurement of actual capital stock and the failure to account for interdependencies in the consumption-investment decisions that take place on farms. These limitations could provide avenues for future research.

Subjects: New Zealand Sheep, Economic aspects, Beef cattle, Agriculture

Copyright: The Author