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Optimal Dynamic Management of Agricultural Land-Uses: An Application of Regime Switching

Author

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  • Doole, Graeme J.
  • Hertzler, Greg

Abstract

The capacity of global agricultural production to meet increased demand for food from population growth and wealth accumulation is threatened by extensive land degradation. Nonetheless, previous research has focused primarily on the dynamic implications of input management and ignored land-use choice. This paper extends this theory through an examination of the intertemporal management of agricultural land through the use of non-crop inputs, such as fertilizer, and land uses that either degrade or restore productivity. The need to consider the relative total asset value of alternative crops over time is demonstrated. Moreover, higher output prices for degrading crops are shown to increase their relative value, motivating the later adoption of substitutes. An inability of land markets to reflect differences in resource quality and low capital malleability promote greater degradation. However, substitution of complementary effects through input use may help to sustain productivity. These factors are discussed in the context of crop sequence management in Western Australian cropping systems.

Suggested Citation

  • Doole, Graeme J. & Hertzler, Greg, 2011. "Optimal Dynamic Management of Agricultural Land-Uses: An Application of Regime Switching," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 43(1), pages 1-14, February.
  • Handle: RePEc:ags:joaaec:100643
    DOI: 10.22004/ag.econ.100643
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    File URL: http://ageconsearch.umn.edu/record/100643/files/jaae346.pdf
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    Citations

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    Cited by:

    1. Miao, Ruiqing & Hennessy, David A. & FENG, HONGLI, 2013. "Native Grassland Conversion: the Roles of Risk Intervention and Switching Costs," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149865, Agricultural and Applied Economics Association.
    2. Ruiqing Miao & David A. Hennessy & Hongli Feng, 2014. "Sodbusting, Crop Insurance, and Sunk Conversion Costs," Land Economics, University of Wisconsin Press, vol. 90(4), pages 601-622.
    3. Ruiqing Miao & David A. Hennessy & Hongli Feng, 2014. "Sodbusting, Crop Insurance, and Sunk Conversion Costs," Land Economics, University of Wisconsin Press, vol. 90(4), pages 601-622.
    4. Olson, David W. & Mason, Nicole M., 2017. "Maize Marketing Boards and Sustainable Intensification: Panel Survey Evidence from Kenya," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258093, Agricultural and Applied Economics Association.

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