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The Effect of National Policies and Labor Market on Land Use Decisions in Developing Countries: An Application of Maximum Simulated Likelihood to System of Censored Acreages with Panel Data

Author

Listed:
  • Bayou Demeke

    (University of Wisconsin-Madison)

  • Ian Coxhead

    (University of Wisconsin-Madison)

Abstract

This paper estimates land use responses of households to relative output prices and wages, using panel data from the Philippines. We present multi-output profit maximizing model to elicit the role of relative prices on land allocation between crops and fallowing. We estimate systems of random effects Tobit acreage equations using maximum simulated likelihood technique. The results show that rising return to labor and management intensive crop reduces land expansion. In addition rising wages also reduce agricultural expansion. The results reveal a potential role for market based policies in shaping environmental outcomes in developing countries.

Suggested Citation

  • Bayou Demeke & Ian Coxhead, 2005. "The Effect of National Policies and Labor Market on Land Use Decisions in Developing Countries: An Application of Maximum Simulated Likelihood to System of Censored Acreages with Panel Data," Others 0503007, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpot:0503007
    Note: Type of Document - pdf; pages: 37
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    References listed on IDEAS

    as
    1. IAN COXHEAD & Agnes Rola, 1999. "Do National Markets and Price Policies Affect Land Use at the Forest Margin? Evidence from the Philippines," Wisconsin-Madison Agricultural and Applied Economics Staff Papers 426, Wisconsin-Madison Agricultural and Applied Economics Department.
    2. Ian Coxhead & Agnes Rola & Kwansoo Kim, 2001. "How Do National Markets and Price Policies Affect Land Use at the Forest Margin? Evidence from the Philippines," Land Economics, University of Wisconsin Press, vol. 77(2), pages 250-267.
    3. Michael R. Carter & Yang Yao, 2002. "Local versus Global Separability in Agricultural Household Models: The Factor Price Equalization Effect of Land Transfer Rights," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 702-715.
    4. Chavas, Jean-Paul & Holt, Matthew T., 1990. "Acreage Decisions Under Risk: The Case of Corn and Soybeans," 1990 Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk Meeting, January 28-31, 1990, Sanibel Island, Florida 271540, Regional Research Projects > S-232: Quantifying Long Run Agricultural Risks and Evaluating Farmer Responses to Risk.
    5. Coxhead, Ian A., 1997. "Induced innovation and land degradation in developing country agriculture," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(3), pages 1-28.
    6. Gourieroux, Christian & Monfort, Alain, 1993. "Simulation-based inference : A survey with special reference to panel data models," Journal of Econometrics, Elsevier, vol. 59(1-2), pages 5-33, September.
    7. Holt, Matthew T., 1999. "A Linear Approximate Acreage Allocation Model," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(2), pages 1-15, December.
    8. Moore, Michael R. & Negri, Donald H., 1992. "A Multicrop Production Model Of Irrigated Agriculture, Applied To Water Allocation Policy Of The Bureau Of Reclamation," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(1), pages 1-15, July.
    9. Raghbendra Jha & John Whalley, 2001. "The Environmental Regime in Developing Countries," NBER Chapters,in: Behavioral and Distributional Effects of Environmental Policy, pages 217-250 National Bureau of Economic Research, Inc.
    10. Rodr Guez-Meza, Jorge & Southgate, Douglas & Gonz Lez-Vega, Claudio, 2004. "Rural poverty, household responses to shocks, and agricultural land use: panel results for El Salvador," Environment and Development Economics, Cambridge University Press, vol. 9(02), pages 225-239, May.
    11. Coxhead, Ian & Shively, Gerald & Shuai, Xiaobing, 2002. "Development policies, resource constraints, and agricultural expansion on the Philippine land frontier," Environment and Development Economics, Cambridge University Press, vol. 7(02), pages 341-363, May.
    12. Shively, Gerald & Pagiola, Stefano, 2004. "Agricultural intensification, local labor markets, and deforestation in the Philippines," Environment and Development Economics, Cambridge University Press, vol. 9(02), pages 241-266, May.
    13. J. Scott Shonkwiler & Steven T. Yen, 1999. "Two-Step Estimation of a Censored System of Equations," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 972-982.
    14. Eswaran, Mukesh & Kotwal, Ashok, 1986. "Access to Capital and Agrarian Production Organisation," Economic Journal, Royal Economic Society, vol. 96(382), pages 482-498, June.
    15. Coyle, Barry T., 1993. "On Modeling Systems Of Crop Acreage Demands," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(1), pages 1-13, July.
    16. Luojia Hu, 2002. "Estimation of a Censored Dynamic Panel Data Model," Econometrica, Econometric Society, vol. 70(6), pages 2499-2517, November.
    17. Feder, Gershon, 1985. "The relation between farm size and farm productivity : The role of family labor, supervision and credit constraints," Journal of Development Economics, Elsevier, vol. 18(2-3), pages 297-313, August.
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    More about this item

    Keywords

    Land Use; Maximum Simulated Likelihood; Panel Data; Tobit; Philippines;

    JEL classification:

    • P - Economic Systems
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics
    • Z - Other Special Topics

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