Panel analysis demonstrates improved farm size transition predictions using a mover–stayer model in French agriculture, indicating the importance of accounting for unobserved heterogeneity.
Summary The paper investigates whether accounting for unobserved heterogeneity in farms' size transition processes improves the representation of structural change in agriculture. Considering a mixture of two types of farm, the mover–stayer model is applied for the first time in an agricultural economics context. The maximum likelihood method and the expectation–maximization algorithm are used to estimate the model's parameters. An empirical application to a panel of French farms from 2000 to 2013 shows that the mover–stayer model outperforms the homogeneous Markov chain model in recovering the transition process and predicting the future distribution of farm sizes.
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Saint-Cyr et al. (2016) studied this question.
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