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Dynamic Discrete Choice Estimation of Agricultural Land Use

Author:
Paul T. Scott  


Issue Date:
2013


Abstract(summary):

Land use change is at the center of urgent debates regarding greenhouse gas mitigation, ecological destruction, and agricultural policy. While most empirical models of land use treat landowners as static decision makers, ignoring the likely possibility that they respond differently to long-run and short-run changes in the economic environment, I formulate and estimate a dynamic discrete choice model of crop acreage with forward-looking landowners. As long as individual landowners have rational expectations and no market power, I show that a dynamic model of land use can be estimated using a linear regression. My empirical approach incorporates unobservable heterogeneity and unobservable supply shocks, issues which are difficult to avoid in modeling land use. Using an expansive new panel data set on land use in the United States, I estimate a long run acreage-price elasticity of 0.32, more than twice as large as the elasticity implied by a model without forward-looking behavior and over five times larger than static elasticities estimated using the same data. Relative to other recent estimates, my dynamic estimates suggest that the US biofuels mandate leads to a 30% larger land use effect and a 59% smaller price increase (in the long run).


Page:
55


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