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Tobit estiamtion with unknown point of censoring with an application to milk market participation in the Ethiopian highlands

Holloway, G. J., Dorfman, J. H. and Ehui, S. K. (2001) Tobit estiamtion with unknown point of censoring with an application to milk market participation in the Ethiopian highlands. Canadian Journal of Agricultural Economics / Revue Canadienne d'Agroeconomie, 49 (3). pp. 291-311. ISSN 1744-7976

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To link to this item DOI: 10.1111/j.1744-7976.2001.tb00307.x

Abstract/Summary

Data augmentation is a powerful technique for estimating models with latent or missing data, but applications in agricultural economics have thus far been few. This paper showcases the technique in an application to data on milk market participation in the Ethiopian highlands. There, a key impediment to economic development is an apparently low rate of market participation. Consequently, economic interest centers on the “locations” of nonparticipants in relation to the market and their “reservation values” across covariates. These quantities are of policy interest because they provide measures of the additional inputs necessary in order for nonparticipants to enter the market. One quantity of primary interest is the minimum amount of surplus milk (the “minimum efficient scale of operations”) that the household must acquire before market participation becomes feasible. We estimate this quantity through routine application of data augmentation and Gibbs sampling applied to a random-censored Tobit regression. Incorporating random censoring affects markedly the marketable-surplus requirements of the household, but only slightly the covariates requirements estimates and, generally, leads to more plausible policy estimates than the estimates obtained from the zero-censored formulation

Item Type:Article
Refereed:Yes
Divisions:Faculty of Life Sciences > School of Agriculture, Policy and Development > Economic and Social Sciences Division > Food Economics and Marketing (FEM)
ID Code:30703
Publisher:Canadian Agricultural Economics Society

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