Responsiveness of farm investment to price changes: An empirical study of the French crop sector
2017
Femenia, Fabienne | Latruffe, Laure | Chavas, Jean-Paul
Understanding how farmers respond to prices can shed light into investment behavior and inform policy makers. We investigate the investment behavior of French crop farmers between 2002 and 2014, with a focus on adjustments to market prices. The analysis relies on a structural investment model derived from the maximization of farmers’ future expected profit. Our estimation results show evidence of significant changes in investment behavior over time, farmers’ investment being more responsive to output price before 2006, and to investment price from 2007. This suggests that government intervention through investment price may have positive impacts during periods of price volatility.
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