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Dealing with corner solutions in multi-crop micro-econometric models: An endogenous switching regime approach with regime fixed costs

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  • Koutchade, Obafèmi Philippe
  • Carpentier, Alain
  • Femenia, Fabienne

Abstract

We propose an Endogenous Regime Switching model specifically designed for modelling acreage choices with corner solutions featuring regime fixed costs. Contrary to models based on censored regression systems, this model is fully coherent from an economic point of view, by construction. To illustrate its empirical tractability, we estimate a random parameter version of this model for a panel dataset of French arable crop producers. Our results show that the model fits well the data, the regime fixed cost matter, and that the decision to produce a crop or not play a major role in the acreage responses to economic incentives.
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Suggested Citation

  • Koutchade, Obafèmi Philippe & Carpentier, Alain & Femenia, Fabienne, 2017. "Dealing with corner solutions in multi-crop micro-econometric models: An endogenous switching regime approach with regime fixed costs," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258341, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea17:258341
    DOI: 10.22004/ag.econ.258341
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