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Correlated non-classical measurement errors, ‘second best’ policy inference and the inverse size-productivity relationship in agriculture:

Author

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  • Abay, Kibrom A.
  • Abate, Gashaw T.
  • Barrett, Christopher B.
  • Bernard, Tanguy

Abstract

We show analytically and empirically that non-classical measurement errors in the two key variables in a hypothesized relationship can bias the estimated relationship between them in any direction. Furthermore, if these measurement errors are correlated, correcting for either one alone can aggravate bias in the parameter estimate of interest relative to ignoring mismeasurement in both variables, a ‘second best’ result with implications for a broad class of economic phenomena of policy interest. We illustrate these results empirically by demonstrating the implications of mismeasured agricultural output and plot size for the long-debated (inverse) relationship between size and productivity.

Suggested Citation

  • Abay, Kibrom A. & Abate, Gashaw T. & Barrett, Christopher B. & Bernard, Tanguy, 2018. "Correlated non-classical measurement errors, ‘second best’ policy inference and the inverse size-productivity relationship in agriculture:," IFPRI discussion papers 1710, International Food Policy Research Institute (IFPRI).
    • Handle: RePEc:fpr:ifprid:1710
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    Cited by:

    1. Aragón, Fernando M. & Restuccia, Diego & Rud, Juan Pablo, 2022. "Are small farms really more productive than large farms?," Food Policy, Elsevier, vol. 106(C).
    2. Kibrom A. Abay, 2020. "Measurement errors in agricultural data and their implications on marginal returns to modern agricultural inputs," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 323-341, May.
    3. Amare, Mulubrhan & Abay, Kibrom A. & Tiberti, Luca & Chamberlin, Jordan, 2020. "Impacts of COVID-19 on Food Security: Panel Data Evidence from Nigeria," GLO Discussion Paper Series 653, Global Labor Organization (GLO).
    4. Kibrom A. Abay & Leah E. M. Bevis & Christopher B. Barrett, 2021. "Measurement Error Mechanisms Matter: Agricultural Intensification with Farmer Misperceptions and Misreporting," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(2), pages 498-522, March.
    5. Maue, Casey C. & Burke, Marshall & Emerick, Kyle, 2020. "Productivity dispersion and persistence among the world's most numerous firms," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304287, Agricultural and Applied Economics Association.

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