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The implications of the US renewable fuel standard programme for farm structure

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  • Constant I. Tra
  • Charles A. Towe

Abstract

We investigate the impact of the 2005 Renewable Fuel Standard (RFS) on farm structure, particularly farm size. We rely on the salience of a new ethanol plant in a farmers' local neighbourhood to identify the impact of the RFS mandate on these spatially advantaged farms. To control for the nonrandom selection of ethanol production facilities, we utilize a propensity score matching estimator, and to remove impact of farm-level or market shifting unobservables resulting from shifts in commodity prices we employ a difference-in-difference (DD) matching approach. We estimate the treatment effect of an ethanol production facility on farm size prior to the RFS mandate and after the RFS programme. The effect of the RFS policy on farm size is obtained as the difference between these two DD matching estimators. Overall, our results suggest that the RFS programme raised the probability of farm size increase by roughly 12-18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the programme contributed to a net increase in farm size of 25-32%, on average, for those spatially advantaged farms.

Suggested Citation

  • Constant I. Tra & Charles A. Towe, 2016. "The implications of the US renewable fuel standard programme for farm structure," Applied Economics, Taylor & Francis Journals, vol. 48(8), pages 712-722, February.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:8:p:712-722
    DOI: 10.1080/00036846.2015.1085644
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    Cited by:

    1. Jennifer Ifft & Deepak Rajagopal & Ryan Weldzuis, 2019. "Ethanol Plant Location and Land Use: A Case Study of CRP and the Ethanol Mandate," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 41(1), pages 37-55, March.
    2. Samiul Haque, 2022. "US federal farm payments and farm size: Quantile estimation on panel data," Journal of Agricultural Economics, Wiley Blackwell, vol. 73(1), pages 139-154, February.
    3. Ifft, Jennifer & Rajagopal, Deepak & Ryan, Weldzius, 2016. "The effect of the ethanol mandate on the Conservation Reserve Program," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 236178, Agricultural and Applied Economics Association.

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