Shadow vs. market prices in explaining land allocation: Subsistence maize cultivation in rural Mexico |
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Authors: | Asl?han Arslan |
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Institution: | Kiel Institute for The World Economy, Poverty Reduction, Equity, and Development Research Group, Düsternbrooker Weg 120, 24105 Kiel, Germany |
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Abstract: | Prices may fail to explain farmers’ land allocation if the relevant decision prices are “shadow prices” that deviate from market prices. This may be the case for farmers who attach significant non-market values to their crops. I theoretically explain why land allocation may not respond to market signals even if transaction costs are not binding. I use nationally representative rural household data from Mexico to show that shadow prices better explain the land subsistence farmers allocate to traditional maize in this center of maize diversity. I discuss the importance of non-market values in understanding supply response and on-farm conservation of traditional crops. |
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Keywords: | O12 O13 Q12 Q15 Q39 |
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