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Economies of Density versus Natural Advantage: Crop Choice on the Back Forty

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  • Thomas J. Holmes

    (University of Minnesota, Federal Reserve Bank of Minneapolis, and NBER)

  • Sanghoon Lee

    (Sauder School of Business, University of British Columbia)

Abstract

We estimate the factors determining specialization of crop choice at the level of individual fields, distinguishing between the role of natural advantage (soil characteristics) and economies of density (scale economies achieved when farmers plant neighboring fields the same). Using rich geographic data from North Dakota, including new data on crop choice collected by satellite, we estimate a model of how a farmer plants adjacent fields under the farmer's control. We find planting decisions on a field are heavily dependent on the soil characteristics of adjacent fields. Through this relationship, we back out the structural parameters of economies of density. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Article provided by MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 94 (2012)
Issue (Month): 1 (February)
Pages: 1-19

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Handle: RePEc:tpr:restat:v:94:y:2012:i:1:p:1-19

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  1. Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003, Royal Economic Society 69, Royal Economic Society.
  2. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2007. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," Harvard Business School Working Papers, Harvard Business School 07-064, Harvard Business School.
  3. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, American Economic Association, vol. 89(2), pages 311-316, May.
  4. Marcy Burchfield & Henry G. Overman & Diego Puga & Matthew A. Turner, 2006. "Causes of Sprawl: A Portrait from Space," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 121(2), pages 587-633, May.
  5. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 60(3), pages 531-42, July.
  6. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 7(3-4), October.
  7. Patrick Bajari & Han Hong & John Krainer & Denis Nekipelov, 2006. "Estimating Static Models of Strategic Interaction," NBER Working Papers 12013, National Bureau of Economic Research, Inc.
  8. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(4), pages 667-705, August.
  9. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, Elsevier, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier.
  10. Thomas J. Holmes, 2008. "The Diffusion of Wal-Mart and Economies of Density," NBER Working Papers 13783, National Bureau of Economic Research, Inc.
  11. Edward L. Glaeser & Jose A. Scheinkman, 1999. "Measuring Social Interactions," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1878, Harvard - Institute of Economic Research.
  12. Evans, William N & Oates, Wallace E & Schwab, Robert M, 1992. "Measuring Peer Group Effects: A Study of Teenage Behavior," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(5), pages 966-91, October.
  13. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc.
  14. Douglas W. Caves & Laurits R. Christensen & Michael W. Tretheway, 1984. "Economies of Density versus Economies of Scale: Why Trunk and Local Service Airline Costs Differ," RAND Journal of Economics, The RAND Corporation, vol. 15(4), pages 471-489, Winter.
  15. Battese, George E., 1992. "Frontier production functions and technical efficiency: a survey of empirical applications in agricultural economics," Agricultural Economics, Blackwell, Blackwell, vol. 7(3-4), pages 185-208, October.
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