Abstract
Economic hysteresis, the continuation of a phenomenon after its initial cause has disappeared, represents an alternative theoretical explanation for the fixed-asset problem. When a set of fixed assets includes quota licenses, hysteresis in license investment leads to distortions that have not been measured in the policy analysis literature. A model of economic "friction" tests the effect of hysteresis in Alberta dairy investment. Estimates of investment functions show that desired investment (disinvestment) must be significantly greater (less) than zero before any action is taken. Because cattle and quota are often purchased together, the relatively long periods of no change in quota holdings that result from hysteresis cause similar periods in which herds neither grow nor contract.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 1-17 |
| Number of pages | 17 |
| Journal | Journal of Agricultural and Resource Economics |
| Volume | 21 |
| Issue number | 1 |
| State | Published - Jul 1 1996 |
Keywords
- Alberta
- Dairy
- Dynamic duality
- Fixed asset
- Hysteresis
- Option value
- Supply management
ASJC Scopus subject areas
- Animal Science and Zoology
- Agronomy and Crop Science
- Economics and Econometrics