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Shadow vs. market prices in explaining land allocation: Subsistence maize cultivation in rural Mexico

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Author Info
Aslihan Arslan
Abstract

Economic models of land allocation may lead to expectations for farmer response that “surprisingly" do not materialize, if market prices fail to reflect the value of farmers' product. “Shadow prices" rather than market prices explain resource allocation better for farmers who attach significant non-market values to their own crops. I extend the theoretical model in Arslan and Taylor (2008) to explain why the land allocation of such farmers may not respond to market signals even if transaction costs are not binding. I estimate the proportion of land subsistence maize farmers allocate to traditional versus modern maize varieties using nationally representative rural household data from Mexico – the center of diversity of maize. I conclude that shadow prices explain land allocation better than market prices and discuss the importance of non-market values in understanding both farmers' supply response and on-farm conservation of traditional crops with non-market values

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1469.

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Length: 20 pages
Date of creation: Dec 2008
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Handle: RePEc:kie:kieliw:1469

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Related research
Keywords: Land allocation; shadow prices; non-market values; traditional crops; on-farm; conservation; Mexico;

Find related papers by JEL classification:
O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
O13 - Economic Development, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
Q39 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Other

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  1. Bellon, Mauricio R. & Adato, Michelle & Becerril, Javier & Mindek, Dubravka, 2006. "Poor farmers' perceived benefits from different types of maize germplasm: The case of creolization in lowland tropical Mexico," World Development, Elsevier, vol. 34(1), pages 113-129, January. [Downloadable!] (restricted)
  2. J. Taylor & Irma Adelman, 2003. "Agricultural Household Models: Genesis, Evolution, and Extensions," Review of Economics of the Household, Springer, vol. 1(1), pages 33-58, January. [Downloadable!] (restricted)
  3. Vincent, D.P., 1976. "Economic Aspects Of Farm Poverty," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 20(02), August. [Downloadable!]
  4. Just, Richard E & Zilberman, David, 1983. "Stochastic Structure, Farm Size and Technology Adoption in Developing Agriculture," Oxford Economic Papers, Oxford University Press, vol. 35(2), pages 307-28, July. [Downloadable!] (restricted)
  5. Brush, Stephen B. & Taylor, J. Edward & Bellon, Mauricio R., 1992. "Technology adoption and biological diversity in Andean potato agriculture," Journal of Development Economics, Elsevier, vol. 39(2), pages 365-387, October. [Downloadable!] (restricted)
  6. Bellon, Mauricio R & Taylor, J Edward, 1993. ""Folk" Soil Taxonomy and the Partial Adoption of New Seed Varieties," Economic Development and Cultural Change, University of Chicago Press, vol. 41(4), pages 763-86, July.
  7. Michel Dumont & Glenn Rayp & Olivier Thas & Peter Willemé, 2005. "Correcting Standard Errors in Two-stage Estimation Procedures with Generated Regressands," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 67(3), pages 421-433, 06. [Downloadable!] (restricted)
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  8. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-32, Nov.-Dec.. [Downloadable!] (restricted)
    Other versions:
  9. Smale, Melinda & Bellon, Mauricio R & Aguirre Gomez, Jose Alfonso, 2001. "Maize Diversity, Variety Attributes, and Farmers' Choices in Southeastern Guanajuato, Mexico," Economic Development and Cultural Change, University of Chicago Press, vol. 50(1), pages 201-25, October.
  10. Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
  11. Feder, Gershon, 1980. "Farm Size, Risk Aversion and the Adoption of New Technology under Uncertainty," Oxford Economic Papers, Oxford University Press, vol. 32(2), pages 263-83, July. [Downloadable!] (restricted)
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