LIFETIME LEVERAGE CHOICE FOR PROPRIETARY FARMERS IN A DYNAMIC STOCHASTIC ENVIRONMENT
By: Collins, Robert A.; Karp, Larry S.
Collins, Robert A.; Karp, Larry S., LIFETIME LEVERAGE CHOICE FOR PROPRIETARY FARMERS IN A DYNAMIC STOCHASTIC ENVIRONMENT, Journal of Agricultural and Resource Economics, Volume 18, Issue 2, December 1993, Pages 225-238
This article reviews various models that may be used to explain optimal leverage choice for the proprietary farmer in a stochastic dynamic environment and develops a new model that highlights the risk of failure rather than the usual concept of risk as the variability of wealth. The model suggests that in addition to the usual factors, farm financial leverage is affected by age, wealth, and the opportunity cost of farming.