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Bayesian estimation of the double hurdle model in the presence of fixed costs

Holloway, G., Barrett, C. B. and Ehui, S. (2005) Bayesian estimation of the double hurdle model in the presence of fixed costs. Journal of International Agricultural Trade and Development, 1 (1). pp. 17-28. ISSN 1556-8520

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Abstract/Summary

We present a model of market participation in which the presence of non-negligible fixed costs leads to random censoring of the traditional double-hurdle model. Fixed costs arise when household resources must be devoted a priori to the decision to participate in the market. These costs, usually of time, are manifested in non-negligible minimum-efficient supplies and supply correspondence that requires modification of the traditional Tobit regression. The costs also complicate econometric estimation of household behavior. These complications are overcome by application of the Gibbs sampler. The algorithm thus derived provides robust estimates of the fixed-costs, double-hurdle model. The model and procedures are demonstrated in an application to milk market participation in the Ethiopian highlands.

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:30708
Publisher:Nova Publishers

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