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Identifying Factor Productivity from Micro-data: The case of EU agriculture. Factor Markets Working Paper No. 34, January 2013

Petrick, Martin and Kloss, Mathias (2013) Identifying Factor Productivity from Micro-data: The case of EU agriculture. Factor Markets Working Paper No. 34, January 2013. [Working Paper]

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    Abstract

    The classical problem of agricultural productivity measurement has regained interest owing to recent price hikes in world food markets. At the same time, there is a new methodological debate on the appropriate identification strategies for addressing endogeneity and collinearity problems in production function estimation. We examine the plausibility of four established and innovative identification strategies for the case of agriculture and test a set of related estimators using farm-level panel datasets from seven EU countries. The newly suggested control function and dynamic panel approaches provide attractive conceptual improvements over the received ‘within’ and duality models. Even so, empirical implementation of the conceptual sophistications built into these estimators does not always live up to expectations. This is particularly true for the dynamic panel estimator, which mostly failed to identify reasonable elasticities for the (quasi-) fixed factors. Less demanding proxy approaches represent an interesting alternative for agricultural applications. In our EU sample, we find very low shadow prices for labour, land and fixed capital across countries. The production elasticity of materials is high, so improving the availability of working capital is the most promising way to increase agricultural productivity.

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    Item Type: Working Paper
    Subjects for non-EU documents: EU policies and themes > Policies & related activities > agriculture policy
    Subjects for EU documents: UNSPECIFIED
    EU Series and Periodicals: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Centre for European Policy Studies (Brussels) > Factor Markets Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 18 Dec 2014 13:42
    Number of Pages: 41
    Last Modified: 18 Dec 2014 13:42
    URI: http://aei.pitt.edu/id/eprint/58549

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