| This dissertation research is a theoretical and empirical investigation into the process of private investment behavior in developing country agriculture. A theoretical model is developed, starting from fundamental relationships of the profit function and the production function. Elements of the theory of investment behavior as formulated for developed countries are brought in, and are variously modified to reflect the many special conditions prevailing in agriculture of developing countries, in particular, of Indian agriculture. Variables representing important government policies are incorporated into the model so as to allow examination of their impact on investment in agriculture. The application of the model utilizes a 30-year time-series of Indian data and involves linear and nonlinear estimation. In highlighting some of the conclusions, the results show that the theory of investment behavior, suitably modified, can be successfully used to model private investment behavior in developing country agriculture. A Davidson-MacKinnon non-nested specification test finds the nonlinear model to be the preferred specification. The estimates indicate, however, that the established variables of output, output-price and user-cost-of-capital do not play as important a role as they do in developed countries. Instead, internal liquidity and external finance play a major role and so does government investment in agriculture. The results show that some government policies, in particular, increased agricultural finance and, to an extent, direct government investment, appear to be paying off well in terms of inducing greater private investment in agriculture. |
