Date of Graduation

1987

Document Type

Dissertation/Thesis

Abstract

Research in areas of structural characteristics and investment demand of Appalachian agricultural production technology is sorely lacking despite such problems as slow factor adjustment, low returns on investments and increasing importance of non-farm income. Regional difference in geography, resource endowment and economic environment reflect differences in investment decision needs that dissipate in national aggregate studies. Ability of Appalachian farmers to benefit from national programs based on these national studies depends on the degree of homogeneity of the structural characteristics of Appalachian production technology relative to the U.S. This remains an empirical question. Based on dynamic optimization, and incorporating the adjustment cost theory and analysis of Appalachian agriculture, and one consistent with the multi-flexible accelerator mechanism was established. Systems of investment demand equations and complete supply response equations were estimated using data on aggregate Appalachian agriculture from 1940-1982. Stock adjustment rates for labor, capital, intermediate materials and land were 17 years, 12 years, 4 years and 66 years, respectively. The relatively slow adjustment speed for land is consistent with the limited availability of economically cultivable land prompted by the topography of the region. All own-price elasticities were negative. Except for labor in the long-run, all other own-price elasticities were inelastic. Technological change was biased towards factor using for labor, intermediate materials and land, but biased towards factor saving for capital. Hypotheses for instantaneous factor adjustment, asset fixity and independence of factor adjustment were all rejected. All production factors exhibited some degree of quasi-fixity. Several important conclusions emerged from the results, some of which are: (1) Structural characteristics derived from aggregate national studies are not representative of Appalachian agriculture, (2) Opportunities to reverse the historical negative growth rate in Appalachian agriculture may exist given appropriate region-specific policy programs, and can serve as a buffer for the high, cyclical unemployment of this region, (3) Demand for investment in Appalachian agriculture is more responsive to input than output price subsidization.

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