Assessing the Productivity Consequences of Agri-Environmental Practices When Adoption Is Endogenous
Bostian, AJ A.; Bostian, Moriah B.; Laukkanen, Marita; Simola, Antti (2018-12-17)
Bostian, AJ A.
Bostian, Moriah B.
Laukkanen, Marita
Simola, Antti
Valtion taloudellinen tutkimuskeskus
17.12.2018
Julkaisun pysyvä osoite on
https://urn.fi/URN:ISBN:978-952-274-225-4
https://urn.fi/URN:ISBN:978-952-274-225-4
Kuvaus
nonPeerReviewed
Tiivistelmä
We address the general problem of selection bias, endemic to analyzing the effects of any policy where adoption is voluntary, with empirical application to environmental policies for agriculture. Many voluntary practices for mitigating the environmental impacts of agriculture provide external benefits while lowering productivity. Policy analysis of the productivity consequences is complicated by the fact that decision-makers can choose their own policy levers, an action that ruins any notion of random assignment. We introduce an identification strategy to correct this kind of endogeneity, combining classic methods from stochastic frontier analysis and selection models. Applying it to micro-level data from Finnish grain farms, we find that more efficient producers are more likely to enroll in subsidized practices. And, because these practices tend to reduce yield, frontier analysis without the endogeneity correction greatly understates productivity losses. In other words, naively basing the frontier estimator on the subset of less productive farms leads to downward bias in the resulting frontier estimates. In fact, average inefficiency more than doubles after the correction in this case. An outlier investigation also suggests that the lowest decile of farms are responsible for most of the selection bias in the uncorrected model.
Tutkimusteema
Environment, energy and climate policy
JEL
Q53, Q58, Q18, Q12, D24, C54, C34, C36
Avainsanat
productivity, stochastic frontier analysis, endogeneity, selection model, agri-environmental policy
Kokoelmat
- VATT Working Papers [155]