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Paper Information

Journal:   EQTESAD-E KESHAVARZI VA TOWSE'E   Spring 2004 , Volume 12 , Number 1 (45); Page(s) 19 To 40.
 
Paper: 

DETERMINATION OF RATE OF RETURN ON INVESTMENT IN THE AGRICULTURAL SECTOR

 
 
Author(s):  SOLTANI G.R.*
 
* College of Agriculture, Shiraz University,Iran
 
Abstract: 

The rate of return on investment and its fluctuation in the agricultural sector were estimated using a modified form of Cobb - Douglas production function. In addition to labor and capital, trend factor and dummy variable were included in the model to study the effects of technical change and the Islamic Revolution on the agricultural output respectively. Results indicated the average productivity of capital during the 1350- 78 period was 2.5. Despite considerable fluctuation, the productivity of capital in agriculture has been increasing during this period. Compared with other sectors of the economy, agriculture has performed better in terms of the efficiency of capital. Rate of return on investment in the agricultural sector during the above period has fluctuated substantially. This fluctuation may be due to factors such as periodic drought, Iran - Iraq war, political and economic upheavals.
Despite the higher productivity of capital in agriculture, the ratio of investment to value added in this sector is substantially lower than other sectors. This indicates that, agriculture has low priority in the allocation of public and private capital. Based on the findings of this study, agricultural sector appears to have a considerable potential for absorbing capital. Some economics incentives to encourage investment in the agricultural sector are indicated.

 
Keyword(s): COBB- DOUGLAS PRODUCTION FUNCTION, PRODUCTIVITY OF CAPITAL, RATE OF RETURN, ICOR, VALUE ADDED, EFFICIENCY OF CAPITAL
 
References: 
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