IDEAS home Printed from https://ideas.repec.org/p/ags/aaea15/206565.html
   My bibliography  Save this paper

Role of Ethanol Plants in Dakotas’ Land Use Change: Analysis Using Remotely Sensed Data

Author

Listed:
  • Arora, Gaurav
  • Wolter, Peter T.
  • Feng, Hongli
  • Hennessy, David A.

Abstract

North and South Dakota have experienced rapid land-use changes in the past decade. Recent studies have shown that these land-use changes are mainly characterized by conversions of grasslands to crop production, especially corn and soybeans. Approximately 271,000 hectares of grasslands were lost to corn and soy production in 2006-2011 period, almost seven times the losses in 1989-2003. The implications of these changing land-uses range from reduced biodiversity and loss of habitat for waterfowl species to low agricultural productivity on drought-sensitive marginal lands. While progress has been made in characterizing regional land-use changes, formal analyses establishing causal relationships at the local level are lacking. We construct a spatially delineated dataset for the Dakotas and utilize a Difference-in-Difference (DID) model in conjugation with Propensity Score Matching to estimate the impact of an ethanol plant on nearby corn-acres. We hold the advent of an ethanol plant to be a treatment that influences land-use on surrounding agricultural plots. In our preliminary work, based on the Parallel Paths assumption of the DID, we find that the effect of ethanol plants on corn production varies by plants and a single point estimate for all ethanol plants in a region, as usually provided in the literature, can be highly misleading. Surprisingly, we find both positive as well as negative effects of ethanol plants on corn-acres that may be statistically insignificant. Negative estimates are irreconcilable to the economic incentives due to these corn-based ethanol plants. We find intensified corn production and reduced soybeans due to the ethanol plants. Our analysis also reflects a difference in opportunity of converting from wheat to corn and from grass to corn. We use placebo tests and pre-treatment trends in corn acres to examine the Parallel Paths assumption that identifies the DID estimates. We find that this assumption fails and propose to carry out this analysis by incorporating differentiated trends into the DID framework through more flexible assumptions in future. An important contribution of this paper is that it presents a unique research design that uses quasi-experimental techniques to evaluate the impact of a change/policy upon availability of spatially delineated datasets. To this extent, our results are to be viewed as preliminary.

Suggested Citation

  • Arora, Gaurav & Wolter, Peter T. & Feng, Hongli & Hennessy, David A., 2015. "Role of Ethanol Plants in Dakotas’ Land Use Change: Analysis Using Remotely Sensed Data," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 206565, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea15:206565
    DOI: 10.22004/ag.econ.206565
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/206565/files/Ethanol%20Plants%20-%20AAEA.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zhang, Wendong & Nickerson, Cynthia J., 2013. "The Housing Market Bust and Farmland Values: Identifying the Changing Influence of Proximity to Urban Centers," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 149870, Agricultural and Applied Economics Association.
    2. Mora, Ricardo & Reggio, Iliana, 2012. "Treatment effect identification using alternative parallel assumptions," UC3M Working papers. Economics we1233, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Motamed, Mesbah J. & McPhail, Lihong Lu, 2011. "Spatial Dimensions of US Crop Selection: Recent Responses to Markets and Policy," 2011 Annual Meeting, July 24-26, 2011, Pittsburgh, Pennsylvania 103270, Agricultural and Applied Economics Association.
    4. Miao, Ruiqing, 2013. "Impact of Ethanol Plants on Local Land Use Change," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 42(2), pages 1-19, August.
    5. Turnquist, Alan & Fortenbery, T. Randall & Foltz, Jeremy D., 2008. "Progress or Devastation? The Effects of Ethanol Plant Location on Local Land Use," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6125, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    6. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-In-Differences Estimates?," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 249-275.
    7. Jason Henderson & Brent A. Gloy, 2009. "The impact of ethanol plants on cropland values in the great plains," Agricultural Finance Review, Emerald Group Publishing, vol. 69(1), pages 36-48, May.
    8. John A. List & Daniel L. Millimet & Per G. Fredriksson & W. Warren McHone, 2003. "Effects of Environmental Regulations on Manufacturing Plant Births: Evidence from a Propensity Score Matching Estimator," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 944-952, November.
    9. Alberto Abadie, 2005. "Semiparametric Difference-in-Differences Estimators," Review of Economic Studies, Oxford University Press, vol. 72(1), pages 1-19.
    10. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    11. Sarah J. Reber, 2005. "Court Ordered Desegregation: Successes and Failures Integrating American Schools since Brown versus Board of Education," Journal of Human Resources, University of Wisconsin Press, vol. 40(3).
    12. Katchova, Ani L., 2009. "The Spatial Effect of Ethanol Biorefinery Locations on Local Corn Prices," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49309, Agricultural and Applied Economics Association.
    13. Zhang, Wendong & Irwin, Elena G. & Nickerson, Cynthia J., 2012. "The Expanding Ethanol Market and Farmland Values: Identifying the Changing Influence of Proximity to Agricultural Delivery Points," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124690, Agricultural and Applied Economics Association.
    14. Xiaodong Du & David A. Hennessy & William M. Edwards, 2007. "Determinants of Iowa Cropland Cash Rental Rates: Testing Ricardian Rent Theory," Center for Agricultural and Rural Development (CARD) Publications 07-wp454, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    15. Kevin McNew & Duane Griffith, 2005. "Measuring the Impact of Ethanol Plants on Local Grain Prices," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 27(2), pages 164-180.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gaurav Arora & Peter T. Wolter & Hongli Feng & David A. Hennessy, 2016. "Role of Ethanol Plants in Dakotas Land Use Change: Incorporating Flexible Trends in the Difference-in-Difference Framework with Remotely-Sensed Data," Center for Agricultural and Rural Development (CARD) Publications 16-wp564, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    2. Liu, Bing & Hudson, Darren & Farmer, Michael, 2015. "The Impact of a Sorghum-Based Ethanol Plant on Local Cotton Acreage: A Spatial Approach," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 229799, Southern Agricultural Economics Association.
    3. Villa, Juan M., 2014. "Social transfers and growth: The missing evidence from luminosity data," WIDER Working Paper Series 090, World Institute for Development Economic Research (UNU-WIDER).
    4. Ciani Emanuele & Fisher Paul, 2019. "Dif-in-Dif Estimators of Multiplicative Treatment Effects," Journal of Econometric Methods, De Gruyter, vol. 8(1), pages 1-10, January.
    5. Marcio M. Janot & Márcio G. P. Garcia, 2017. "Foreign Currency Debt and Fixed Exchange Rate Regimes: the importance of implicit guarantees against currency devaluations," Working Papers Series 459, Central Bank of Brazil, Research Department.
    6. Georgios Voucharas & Dimitrios Xefteris, 2018. "Women's Political Power and Environmental Outcomes," University of Cyprus Working Papers in Economics 07-2018, University of Cyprus Department of Economics.
    7. Minasyan, Anna & Nunnenkamp, Peter & Richert, Katharina, 2017. "Does Aid Effectiveness Depend on the Quality of Donors?," World Development, Elsevier, vol. 100(C), pages 16-30.
    8. Junpyo Park & John Anderson & Eric Thompson, 2019. "Land-Use, Crop Choice, and Proximity to Ethanol Plants," Land, MDPI, Open Access Journal, vol. 8(8), pages 1-14, July.
    9. Christian Almer & Stefan Boes & Stephan Nuesch, 2013. "How do Housing Prices Adjust After an Environmental Shock? Evidence from a State-Mandated Change in Aircraft Noise Exposure," Department of Economics Working Papers 11/12, University of Bath, Department of Economics.
    10. Christian Volpe Martincus, 2010. "Odyssey in International Markets: An Assessment of the Effectiveness of Export Promotion in Latin America and the Caribbean," IDB Publications (Books), Inter-American Development Bank, number 16458, February.
    11. Lechner, Michael, 2011. "The Estimation of Causal Effects by Difference-in-Difference Methods," Foundations and Trends(R) in Econometrics, now publishers, vol. 4(3), pages 165-224, November.
    12. repec:tul:wpaper:1506 is not listed on IDEAS
    13. Ting Ye & Luke Keele & Raiden Hasegawa & Dylan S. Small, 2020. "A Negative Correlation Strategy for Bracketing in Difference-in-Differences," Papers 2006.02423, arXiv.org, revised Jan 2021.
    14. Juan M. Villa, 2014. "Social Transfers and Growth: The Missing Evidence from Luminosity Data," WIDER Working Paper Series wp-2014-090, World Institute for Development Economic Research (UNU-WIDER).
    15. Hummy Song & Anita L. Tucker & Karen L. Murrell & David R. Vinsonc, 2018. "Closing the Productivity Gap: Improving Worker Productivity Through Public Relative Performance Feedback and Validation of Best Practices," Management Science, INFORMS, vol. 64(6), pages 2628-2649, June.
    16. Julian Donaubauer & Peter Nunnenkamp, 2016. "Is Aid for Infrastructure Effective? A Difference-in-Difference-in-Differences Approach," Economics Bulletin, AccessEcon, vol. 36(2), pages 857-870.
    17. Luigi Donato & Anna Saporito & Alessandro Scognamiglio, 2013. "Businesses seized from organized crime groups: their relations with the banking system," Questioni di Economia e Finanza (Occasional Papers) 202, Bank of Italy, Economic Research and International Relations Area.
    18. Villas-Boas, Sofia B, 2020. "Reduced Form Evidence on Belief Updating Under Asymmetric Information," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt08c456vk, Department of Agricultural & Resource Economics, UC Berkeley.
    19. Jing Dong & Elad Yom-Tov & Galit B. Yom-Tov, 2019. "The Impact of Delay Announcements on Hospital Network Coordination and Waiting Times," Management Science, INFORMS, vol. 67(5), pages 1969-1994, May.
    20. Pierre Lefebvre & Philip Merrigan, 2005. "The Québec's Experiment of $5 per Day per Child Childcare Policy and Mother's Labour Supply: Evidence Based on the Five Cycles of the NLSCY," CIRANO Project Reports 2005rp-21, CIRANO.
    21. Jasper Grashuis, 2019. "Spatial Competition in the Iowa Corn Market: Informing the Pricing Behavior of Corporate and Cooperative Grain Merchants," Sustainability, MDPI, Open Access Journal, vol. 11(4), pages 1-13, February.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea15:206565. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search). General contact details of provider: http://edirc.repec.org/data/aaeaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.