Agriculture Reference
In-Depth Information
F i
where
is an unobserved farm organization response variable;
F i
is the observed dichoto-
mous choice of farm organization for farm
i
, which is equal to 1 for family farms and equal
X i
to 0 for nonfamily farms;
is a row vector of exogenous variables including the constant;
β i
i
is a farm-specific error term. We use
a logit model to generate maximum likelihood estimates of the model given by equations
(9.12) and (9.13).
The first column in table 9.3 shows the logit coefficient estimates for the model given
by equations (9.12) and (9.13) for a sample of 959 farms. Prediction 9.6 implies that the
estimated coefficient on CYCLES
is a column vector of unknown coefficients; and
>
1 should be negative and the estimated coefficient
on CYCLES
1 should be positive. In table 9.3, both estimated coefficients for the
CYCLES variable have the predicted signs and are statistically significant. Prediction 9.6
also implies that the estimated coefficient for BEEF and DAIRY should be positive and
negative, respectively. Table 9.3 shows that the coefficient estimates BEEF and DAIRY
have the predicted signs and the estimates are statistically significant. Prediction 9.5 implies
that the estimated coefficient for IRRIGATION (percent of farmland irrigated) should be
negative. Indeed, the estimated coefficients for IRRIGATION are negative, although the
estimates fall just short of being statistically significant. The estimated coefficients on
the control variables AGE, AGE 2 , EDUCATION, and EDUCATION 2 (listed as farmer
variables in the table) have no predicted coefficient signs. The estimates show, however,
that older and more educated farmers are more likely to organize their operations as family
farms.
<
The Level of Capital across Farm Organizations. Prediction 9.10 states that the level
of capital will be lowest for family farmers who face the highest costs of capital and largest
for corporate farms that face the lowest cost of capital. Simple farm-level averages from the
British Columbia-Louisiana data confirm this prediction. In these data, the average value
of capital, across all crops, for family farms is $75,474; for partnerships the average is
$122,583, for family corporations the average is $191,692, and for nonfamily corporate
farms the average is $281,205. The differences in these means are all statistically signifi-
cant.
We can more precisely test this prediction by estimating the level of capital per farm
(k i )
using the following empirical model:
k i = F i γ i + X i ξ i + i i =
1,
...
,
n
,
(9.14)
where
F i
is a farm organization choice dummy variable;
γ i
is the corresponding coefficient;
X i
is a row vector of exogenous variables including the constant;
ξ i
is a column vector of
unknown coefficients; and
i
is a farm-specific error term.
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