Structural Agricultural Land Use Modelling

This paper develops a structural econometric model of agricultural land use and production based on the joint multi-output technology representation introduced by Chambers and Just (1989). Starting from a flexible specification of the farm profit function we derive land use allocation, inputapplications, crops yield and livestock number equations in a joint and theoretically consistent framework. We present an empirical application using fine-scale spatial data covering the entirety of England and Wales and including the main economic, policy and environmental drivers of land use change in the past 40 years. To account for the presence of censored observations in this micro-level data we estimate the model as a system of two-limits Tobit equations via Quasi-Maximum Likelihood. We finally compare the forecasting ability of our approach against an established benchmark: the land use share logit model.