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Shadow vs. market prices in explaining land allocation: subsistence maize cultivation in rural Mexico

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  • Arslan, Aslıhan

Abstract

Economic models of land allocation may lead to expectations for farmer response that surprisingly do not materialize, if market prices fail to reflect the value of farmers' product. Shadow prices rather than market prices explain resource allocation better for farmers who attach significant non-market values to their own crops. I extend the theoretical model in Arslan and Taylor (2008) to explain why the land allocation of such farmers may not respond to market signals even if transaction costs are not binding. I estimate the proportion of land subsistence maize farmers allocate to traditional versus modern maize varieties using nationally representative rural household data from Mexico the center of diversity of maize. I conclude that shadow prices explain land allocation better than market prices and discuss the importance of non-market values in understanding both farmers' supply response and on-farm conservation of traditional crops with non-market values.

Suggested Citation

  • Arslan, Aslıhan, 2008. "Shadow vs. market prices in explaining land allocation: subsistence maize cultivation in rural Mexico," Kiel Working Papers 1469, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1469
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    References listed on IDEAS

    as
    1. Bellon, Mauricio R. & Adato, Michelle & Becerril, Javier & Mindek, Dubravka, 2006. "Poor farmers' perceived benefits from different types of maize germplasm: The case of creolization in lowland tropical Mexico," World Development, Elsevier, vol. 34(1), pages 113-129, January.
    2. Arslan, Aslihan & Taylor, J.Edward, 2009. "Farmers' Subjective Valuation of Subsistence Crops: The Case of Traditional Maize in Mexico," American Journal of Agricultural Economics APPENDICES, Agricultural and Applied Economics Association, vol. 91(4), pages 1-4, April.
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    Cited by:

    1. Chibwana, Christopher & Fisher, Monica & Shively, Gerald, 2012. "Cropland Allocation Effects of Agricultural Input Subsidies in Malawi," World Development, Elsevier, vol. 40(1), pages 124-133.
    2. repec:spr:jqecon:v:15:y:2017:i:3:d:10.1007_s40953-016-0058-z is not listed on IDEAS
    3. Embaye, Weldensie T. & Bergtold, Jason S. & Schwab, Benjamin & Zereyesus, Yacob A., 2018. "Modeling Farm Household’s Productivity under Inseparable Production and Consumption decisions," 2018 Annual Meeting, August 5-7, Washington, D.C. 274226, Agricultural and Applied Economics Association.
    4. Chakir, Raja & Lungarska, Anna, 2015. "Agricultural land rents in land use models: a spatial econometric analysis," 150th Seminar, October 22-23, 2015, Edinburgh, Scotland 212641, European Association of Agricultural Economists.
    5. Parisa Aghajanzadeh-Darzi & Pierre-Alain Jayet & Athanasios Petsakos, 2017. "Improvement of a Bio-Economic Mathematical Programming Model in the Case of On-Farm Source Inputs and Outputs," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 15(3), pages 489-508, September.

    More about this item

    Keywords

    Land allocation; shadow prices; non-market values; traditional crops; on-farm conservation; Mexico;

    JEL classification:

    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q39 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Other

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