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The importance of accounting for unobserved heterogeneity, state-dependence and differences in residual variances across groups: An application to Irish Farmers land market participation decisions

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Author Info

  • Stephen O'Neill

    ()
    (Department of Economics, National University of Ireland, Galway, Ireland)

  • Kevin Hanrahan

    (Rural Economy and Development Programme, Teagasc, Athenry, Co. Galway, Ireland)

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    Abstract

    Land is an essential input into agricultural production. A grwoing literature is concerned with the factors influencing farmers’ land market participation decisions in developing countries, with developed countries largely ignored. Current best-practise in the land market participation literature is exemplified by Holden et al. (2007) who use a dynamic model which allows for state-dependence and unobserved heterogeneity. Much of the literature fails to adequately deal with these features of land market decisions. In addition, a single model is used to represent all farm types. In this paper, we firstly consider the factors influencing land market participation decisions in a developing country, Ireland, while allowing for state-dependence, unobserved heterogeneity and differences across farm tyes. We compare these results to those that are obtained while ignoring state-dependence, unobserved heterogeneity and differences between farm types. Our results suggest that some caution may be warranted when these aspects are ignored when if fact they are present.

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    File URL: http://www.agresearch.teagasc.ie/rerc/downloads/workingpapers/10wpre05.pdf
    File Function: First version, 2010
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    Bibliographic Info

    Paper provided by Rural Economy and Development Programme,Teagasc in its series Working Papers with number 1005.

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    Length: 32 pages
    Date of creation: 2010
    Date of revision:
    Handle: RePEc:tea:wpaper:1005

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    Web page: http://www.agresearch.teagasc.ie/rerc/
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    1. Akay, Alpaslan, 2009. "The Wooldridge Method for the Initial Values Problem Is Simple: What About Performance?," IZA Discussion Papers 3943, Institute for the Study of Labor (IZA).
    2. Jin, Songqing & Deininger, Klaus W., 2007. "Land Rental Markets in the Process of Rural Structural Transformation: Productivity and Equity Impacts from China," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9932, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    4. Arulampalam, Wiji & Stewart, Mark B., 2008. "Simplified Implementation of the Heckman Estimator of the Dynamic Probit Model and a Comparison with Alternative Estimators," The Warwick Economics Research Paper Series (TWERPS) 884, University of Warwick, Department of Economics.
    5. Teklu, Tesfaye & Lemi, Adugna, 2004. "Factors affecting entry and intensity in informal rental land markets in Southern Ethiopian highlands," Agricultural Economics, Blackwell, vol. 30(2), pages 117-128, March.
    6. Holden, Stein T. & Deininger, Klaus & Ghebru, Hosaena, 2007. "Impact of Land Certification on Land Rental Market Participation in Tigray Region, Northern Ethiopia," MPRA Paper 5211, University Library of Munich, Germany.
    7. Vranken, Liesbet & Swinnen, Johan, 2006. "Land rental markets in transition: Theory and evidence from Hungary," World Development, Elsevier, vol. 34(3), pages 481-500, March.
    8. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    9. Kung, James Kai-sing, 2002. "Off-Farm Labor Markets and the Emergence of Land Rental Markets in Rural China," Journal of Comparative Economics, Elsevier, vol. 30(2), pages 395-414, June.
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