Staff Paper No. 414 - Abstract
The Evolution of Agricultural Soil Quality: A Methodology for Measurement and Some Land Market Implications
The limited observability of soil quality has both static and dynamic dimensions, and together, these may contribute to a form of land market failure in which underinvestment in soil conservation occurs. In this paper, we apply two innovative econometric approaches to crop trials data from a Univ. of Wisconsin research station to examine the effects of rotations and fertilizer use on the dynamics of soil quality and corn yields. In the first approach, we develop a reduced-form, random coefficients model of yield responses to nitrogen fertilizer and rotations, in which both short- and long-run substitutability of N fertilizer for rotation can be evaluated. The second approach exploits the recursive properties of a dynamic structural model to explicitly recover an indirect but general measure of soil quality. This measure, based on readily available data, can contribute to the improvement of land market performance by reducing informational asymmetry. At a methodological level, our analysis also highlights the complementarity of the two econometric approaches used.
Last updated on Wed, Jun 21, 2006 2:39pm