Net Investment in Agricultural Tractors

This essay considers investment in agricultural tractors in the UK, and examines and compares econometric models of investment. A net investment series is calculated from quality‐adjusted gross investment figures, showing limited negative net investment over time but with substantial variability. Four time‐series modelling techniques are compared as representations of the demand for tractors over the period 1964 to 1990; these are the accelerator (clay‐clay), neo‐classical (putty‐putty), expectations augmented neo‐classical (putty‐clay) and ad hoc models. Model results support the use of an expectations augmented, neo‐classical model of net investment in a partial adjustment framework. Future expectations of agricultural policy are considered as a major influence on investment, an aspect that backwards‐looking expectations models only partially represent.