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    The importance of accounting for unobserved heterogeneity, state-dependence and differences in residual variances across groups: An application to Irish Farmers land market participation decisions

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    Author
    O'Neill, Stephen
    Hanrahan, Kevin
    Keyword
    Land market participation
    Ireland
    Farm types
    Date
    2010
    
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    URI
    http://hdl.handle.net/11019/694
    Citation
    S. O'Neill and K. Hanrahan (2010) The importance of accounting for unobserved heterogeneity, state-dependence and differences in residual variances across groups: An application to Irish Farmers land market participation decisions. RERC Working Paper Series PUT 10-WP-RE-05
    Abstract
    Land is an essential input into agricultural production. A grwoing literature is concerned with the factors influencing farmers’ land market participation decisions in developing countries, with developed countries largely ignored. Current best-practise in the land market participation literature is exemplified by Holden et al. (2007) who use a dynamic model which allows for state-dependence and unobserved heterogeneity. Much of the literature fails to adequately deal with these features of land market decisions. In addition, a single model is used to represent all farm types. In this paper, we firstly consider the factors influencing land market participation decisions in a developing country, Ireland, while allowing for state-dependence, unobserved heterogeneity and differences across farm tyes. We compare these results to those that are obtained while ignoring state-dependence, unobserved heterogeneity and differences between farm types. Our results suggest that some caution may be warranted when these aspects are ignored when if fact they are present.
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