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

  • Thomas J. Holmes

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

  • Sanghoon Lee

    (Sauder School of Business, University of British Columbia)

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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File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00149
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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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  9. Glenn Ellison & Edward L. Glaeser, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," Harvard Institute of Economic Research Working Papers 1862, Harvard - Institute of Economic Research.
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