TY  - JOUR
AU  - Holmes,Thomas J.
AU  - Lee,Sanghoon
TI  - Economies of Density versus Natural Advantage: Crop Choice on the Back Forty
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14704
PY  - 2009
Y2  - February 2009
UR  - http://www.nber.org/papers/w14704
L1  - http://www.nber.org/papers/w14704.pdf
N1  - Author contact info:
Thomas J. Holmes
Department of Economics
University of Minnesota
4-101 Hanson Hall
1925 Fourth Street South
Minneapolis, MN 55455
Tel: 612/625-4512
Fax: 612/624-0209
E-Mail: holmes@umn.edu

Sanghoon Lee
Sauder School of Business
University of British Columbia
2053 Main Mall, Vancouver, BC V6T1Z2, Canada
E-Mail: Sanghoon.Lee@sauder.ubc.ca
AB  - We estimate the factors determining specialization of crop choice at the level of individual fields, distinguishing between the role of natural advantage (soil characteristics) and economies of density (scale economies achieved when farmers plant neighboring fields with the same crop).  Using rich geographic data from North Dakota, including new data on crop choice collected by satellite, we estimate the analog of a social interactions econometric model for the planting decisions on neighboring fields.  We find that planting decisions on a field are heavily dependent on the soil characteristics of the neighboring fields. Through this relationship, we back out the structural parameters of economies of density.  Setting an Ellison-Glaeser dartboard level of specialization as a benchmark, we find that of the actual level of specialization achieved beyond this benchmark, approximately two-thirds can be attributed to natural advantage and one-third to density economies.
ER  -