Modeling profit-maximizing land-allocation behavior

Understanding farmers' decisions about agricultural production, the use of inputs and the allocation of land among crops is central to the analysis of agricultural and environmental policy. Duality theory enables the specification and estimation of models representing production and input use responses to price and policy changes that are consistent with rational behavior. However, there are no equivalent results describing the rational allocation of land among crops.;Land-allocation behavior is of increasing interest as many environmental impacts of production are related to land use. This study develops theoretical results describing profit-maximizing land-allocation behavior that are used to structure econometric models of decisions about crop production, land allocation, and input use. Specifically, new comparative static results are developed to describe the behavior of profit-maximizing farmers who manage production systems in which multiple crops compete for allocations of a fixed land area and crops are non-joint in production. These results are used to specify an econometric model of producer behavior that permits joint production but nests the non-joint, land-constrained production model. Some potential applications of this model are illustrated by estimating a model of Saskatchewan crop land-allocation behavior and testing for joint production in the presence of a land constraint.