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Empirical modeling of production decisions of heterogeneous farmers with random parameter models

Author

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  • Koutchade, Philippe
  • Carpentier, Alain
  • Féménia, Fabienne
Abstract
Evidences of the effects of unobserved heterogeneity in micro-econometric models are now pervasive in many applied economics fields. This article investigates this issue for agricultural production choice models. Farms’ and farmers’ unobserved heterogeneity can be accounted for in micro-econometric agricultural production choice models by relying on available modeling and inference tools. The random parameter (RP) framework allows achieving this goal in a fairly flexible way. This modeling framework has already been successfully used in numerous empirical studies covering many topics. It simply considers RP versions of standard models. Extensions of the Expectation-Maximization algorithms have been specifically developed in the computational statistics literature for estimating RP models. They appear to be well suited for large statistical models such as micro-econometric agricultural production choice models. The estimation of a RP multi-crop econometric model shows that unobserved heterogeneity matters in a sample of French farmers specialized in cash grain production covering a relatively small geographical area. The key parameters of this RP model significantly vary across farms. Simulation results obtained from the estimated RP model confirm that the sampled farmers’ choices respond heterogeneously to homogenous economic incentives. Ignoring this heterogeneity impacts both the distribution and the magnitude of the simulated effects.

Suggested Citation

  • Koutchade, Philippe & Carpentier, Alain & Féménia, Fabienne, 2015. "Empirical modeling of production decisions of heterogeneous farmers with random parameter models," Working Papers 210097, Institut National de la recherche Agronomique (INRA), Departement Sciences Sociales, Agriculture et Alimentation, Espace et Environnement (SAE2).
    • Handle: RePEc:ags:inrasl:210097
    DOI: 10.22004/ag.econ.210097
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    References listed on IDEAS

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    Cited by:

    1. Fabienne Féménia & Elodie Letort, 2016. "How to achieve significant reduction in pesticide use? An empirical evaluation of the impacts of pesticide taxation associated to a change in cropping practice," Working Papers SMART 16-02, INRAE UMR SMART.
    2. Femenia, Fabienne & Letort, Elodie, 2016. "How to significantly reduce pesticide use: An empirical evaluation of the impacts of pesticide taxation associated with a change in cropping practice," Ecological Economics, Elsevier, vol. 125(C), pages 27-37.

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    More about this item

    Keywords

    Agricultural and Food Policy;

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General

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