THE ESTIMATION OF INVESTMENT EQUATIONS AT THE FARM-LEVEL

On the basis of annual data for individual farms, a model is estimated which explains investment by the Dutch dairy sector in land, buildings and machinery. As a farmer does not invest in all three capital goods every year, a large number of observations are clustered at zero. Because of this, the commonly used estimation methods are unsatisfactory. In this study an adjusted estimation method is developed, known as an -infrequency purchase model'. Application of this statistical model offers the opportunity to build an investment model which is based on the neo-classical production theory, but also contains some elements of the financial theory of investment.