Do Dutch farmers invest in expansion despite increased policy uncertainty? A participatory Bayesian network approach

Abstract

Abstract An important but understudied factor influencing strategic decisions of farmers is policy uncertainty. Increased policy uncertainty may expedite the timing of investments in expansion, a phenomenon that has been observed in the Dutch dairy sector in recent years. Using a participatory Bayesian network, we aimed to identify and assess the farm, farmer, and environmental characteristics that explain and predict investment strategies. The variable policy uncertainty is modeled as a multidimensional concept that is a function of objective and subjective variables. We found that the most important variables influencing investment timing are succession, risk attitude, perceived policy uncertainty, and earning capacity. The insights derived from this study are useful for policy advisors, finance providers, farm advisors, and also farmers themselves to enhance their understanding of why and when farm investments are likely to occur despite the high level of policy uncertainty. [EconLit Citations: Q180 Agricultural Policy; Food Policy; Animal Welfare Policy G410 Behavioral Finance: Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets].

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