RESOURCE USE RATES: ESTIMATION OF TIME INVARIANT DECISION RULES (EROSION)
As interest in soil conservation has increased, understanding the soil management decision rule used by farmers has become more important. The model developed to analyze the optimal decision rule for soil use rates is essentially a supply response model which assumes rational expectations. It can be characterized as a dynamic optimal control model with feedback from decisions to states. Three Stage Least Squares estimation is re-interpreted to fit the requirements of rational expectations. The estimated coefficients suggest that soil conservation policy must consider general economic variables as well as traditional variables such as soil depth and cost sharing to be successful.
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