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Growth of agricultural capital and the farm income problem (Canada 1935-1965)

University of British Columbia

Average Canadian farm incomes tend to be consistently lower than non-farm incomes. Many reasons, including aggregate overproduction are advanced as possible explanations of the above problem. This thesis attempts to determine whether overproduction has been one of the causes of the farm income problem. The bulk of information used in this study was time series data as prepared by the Dominion Bureau of Statistics for the years 1935 to 1965. A model was constructed to test two related hypotheses regarding the presence of excess capital formation and its effect on income and overproduction. The basic findings of the study were that capital formation was not greater than required to produce an aggregate supply of agricultural products equal to aggregate demand. The growth in aggregate supply and aggregate demand were found to be very similar for the period 1935 to 1965, thus indicating that the farm income problem was not aggravated during this era by overproduction. In subsequent analysis, a broader view of the problem was undertaken. To begin, it was established that per capita farm incomes have been growing at a rate similar to that of non-farm incomes. In addition the so called "cost-price squeeze" was not found when the entire 1935 to 1965 period was observed but rather was only found in subperiods. Factor share analysis was used to show that agricultural capital offered returns at least equal to the opportunity costs of capital.

Text

2011-06-07

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http://hdl.handle.net/2429/35203

Agricultural Economics

University of British Columbia

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