Working Paper: NBER ID: w14704
Authors: Thomas J. Holmes; Sanghoon Lee
Abstract: 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 with the same crop). Using rich geographic data from North Dakota, including new data on crop choice collected by satellite, we estimate the analog of a social interactions econometric model for the planting decisions on neighboring fields. We find that planting decisions on a field are heavily dependent on the soil characteristics of the neighboring fields. Through this relationship, we back out the structural parameters of economies of density. Setting an Ellison-Glaeser dartboard level of specialization as a benchmark, we find that of the actual level of specialization achieved beyond this benchmark, approximately two-thirds can be attributed to natural advantage and one-third to density economies.
Keywords: Crop Choice; Natural Advantage; Economies of Density
JEL Codes: Q10; R12; R14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Neighbors' soil attributes (Q15) | Planting decisions on a field (Q15) |
| Natural advantages (F11) | Specialization in crop choice (Q12) |
| Density economies (R12) | Specialization in crop choice (Q12) |
| Elimination of density economies (R12) | Long-run planting levels for specific crops (Q15) |
| Neighboring fields' characteristics (Y80) | Planting decisions on a field (Q15) |
| Planting decisions on a field (Q15) | Specialization in crop choice (Q12) |