Shadow vs. market prices in explaining land allocation: Subsistence maize cultivation in rural Mexico
AbstractEconomic 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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Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1469.
Length: 20 pages
Date of creation: Dec 2008
Date of revision:
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
This paper has been announced in the following NEP Reports:
- NEP-AGR-2008-12-07 (Agricultural Economics)
- NEP-ALL-2008-12-07 (All new papers)
- NEP-DEV-2008-12-07 (Development)
- NEP-LAB-2008-12-07 (Labour Economics)
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