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GTAP Resource #4187

"Agricultural land use in AGE model production functions"
by Simola, Antti

Common deficiency well known to AGE model developers is the lack of model parameter estimates. In my paper I empirically estimate the substitution elasticities involved in land use change modeling. Modeling of land use change has become prominent area in AGE analyses after wide adoption of policies that support biofuel production. Increased production of biofuels was initially seen as a possible solution for the energy and greenhouse gas problems. However, when the effects, direct and indirect, on the land use were taken into consideration, the benefits of biofuel production became much more questionable. Most of the studies that have assessed the indirect land use (ILUC) effects of the biofuel production rely on AGE modeling. However, no empirical analyses on how to model the land use in AGE model production function exist thus far. I used an unbalanced panel data of farm enterprises (more than 30000 observations between 2005 and 2009 in an industrialized nation divided to five main production lines: beef, dairy, pork, poultry and grains) to empirically analyze the agricultural land use in AGE model production function. With the analysis I aim at finding out 1) how to model land use in production function properly and 2) what range the plausible parameter values should have.

For the evaluation of agricultural production function with land use I used the following strategy. First, I evaluated the nest of three primary factors capital, labor and land. I considered four alternative CES nest structures and the CRESH function which are functional forms compatible with AGE modeling. Nested CES function is the most common production function type used in AGE models. CRESH, originally proposed by Hanoch (1971) is more general than CES and suitable for AGE model production function, but still far less applied in modeling work than CES. For CES functions, I applied linearized system of simultaneous equations with seemingly unrelated regression (SUR) estimation method...

Resource Details (Export Citation) GTAP Keywords
Category: 2013 Conference Paper
Status: Published
By/In: Presented at the 16th Annual Conference on Global Economic Analysis, Shanghai, China
Date: 2013
Created: Simola, A. (4/15/2013)
Updated: Simola, A. (4/15/2013)
Visits: 2,272
- Calibration and parameter estimation
- Climate change policy
- Land use
- European Union

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