Structural Agricultural Land Use Modeling for Spatial Agro‐Environmental Policy Analysis

This paper develops a spatially disaggregated, structural econometric model of agricultural land use and production based on the joint multi‐output technology representation introduced by Chambers and Just (1989). Starting from a flexible specification of the farm profit function, we derive land use allocation, input application, crop yield, and livestock intensity equations in a joint and theoretically consistent framework. To account for the presence of censored observations in micro‐level data, the model is estimated as a system of two‐limit Tobit equations via quasi‐maximum likelihood. We present an empirical application using fine‐scale spatial data covering the entirety of England and Wales and including the main economic, policy, and environmental drivers of land use change in the past forty years. A simulation of the effects of diffuse pollution reduction measures illustrates how our approach can be applied for agro‐environmental policy appraisal.