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Optimal Dynamic Management of Agricultural Land-Uses: AnApplication of Regime Switching

Published online by Cambridge University Press:  26 January 2015

Graeme J. Doole  and
Greg L. Hertzler
Graeme J. Doole
Affiliation:
Centre of Environmental Economics and Policy, School of Agricultural and Resource Economics, Faculty of Natural and Agricultural Sciences, University of Western Australia, Crawley, Western Australia, Australia Department of Economics, Waikato Management School, University of Waikato, Hamilton, New Zealand
Greg L. Hertzler
Affiliation:
School of Agricultural and Resource Economics, Faculty of Agriculture, Food and Natural Resources, University of Sydney, Sydney, New South Wales, Australia
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Abstract

The capacity of global agricultural production to meet increased demand forfood from population growth and wealth accumulation is threatened byextensive land degradation. Nonetheless, previous research has focusedprimarily on the dynamic implications of input management and ignoredland-use choice. This paper extends this theory through an examination ofthe intertemporal management of agricultural land through the use ofnon-crop inputs, such as fertilizer, and land uses that either degrade orrestore productivity. The need to consider the relative total asset value ofalternative crops over time is demonstrated. Moreover, higher output pricesfor degrading crops are shown to increase their relative value, motivatingthe later adoption of substitutes. An inability of land markets to reflectdifferences in resource quality and low capital malleability promote greaterdegradation. However, substitution of complementary effects through inputuse may help to sustain productivity. These factors are discussed in thecontext of crop sequence management in Western Australian croppingsystems.

Keywords

crop sequencesland degradationregime switchingQ15Q24

Information

Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 43 , Issue 1 , February 2011 , pp. 43 - 56
Copyright
Copyright © Southern Agricultural Economics Association 2011

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