Farm Profitability as a Driver of Spatial Spillovers: The Case of Somatic Cell Counts on Wisconsin Dairies

Theodoros Skevas,Victor E Cabrera,Ioannis Skevas

doi:10.1017/age.2020.22

Theodoros Skevas, Victor E Cabrera + Show 1 more

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https://doi.org/10.1017/age.2020.22

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Abstract

AbstractWe hypothesize that spatial spillovers among neighboring farms are not only driven by spatial proximity, but also by farm profitability considerations. This hypothesis is tested by examining the role of spatial spillovers in shaping somatic cell counts (SCC) on Wisconsin dairy farms. Results show that neighborhood links defined both in terms of geographic proximity and farm profitability give rise to spatial spillovers that affect SCC. Significant differences in the estimated spatial spillovers are observed when defining the neighborhood space in terms of both farm profitability and geographic proximity as opposed to geographic proximity alone, with the data favoring the former specification.

Highlights

Spatial spillovers are defined as the impact that a characteristic or action of a unit i has on the outcomes, decisions, or actions of other units j (Halleck Vega and Elhorst 2015).1 The role of spatial spillovers on farm-level behavior and performance is a topic of increasing interest in agricultural economics research
The spatial lag of X model (SLX) model can be written as follows: SCCt = Xtb + WXtg + a + et where somatic cell counts (SCC) is an N × 1 vector of log-transformed farm-specific somatic cell count scores observed in period t, X is an N × K matrix of K farm-specific characteristics that may affect SCC, W is an N × N spatial weighting matrix, β and γ are the associated K × 1 vectors of parameters to be estimated, α is an N × 1 vector of unobserved farm-specific heterogeneity effects, and ε is an N × 1 vector of disturbance terms
We explore whether and to what extent spatial spillovers affect SCC, making it the first article to link SCC with peer influence

Summary

Introduction

Spatial spillovers are defined as the impact that a characteristic or action of a unit i has on the outcomes, decisions, or actions of other units j (Halleck Vega and Elhorst 2015). The role of spatial spillovers on farm-level behavior and performance is a topic of increasing interest in agricultural economics research. The role of spatial spillovers on farm-level behavior and performance is a topic of increasing interest in agricultural economics research. Farmers may choose other farmers to mimic with whom they share common personal or professional characteristics (e.g., education, membership in a professional association); the latter can be referred to as homophilic neighbors, using the terminology of Rogers (2010) Another possibility is that farmers adjust their practices to align with those of their economically successful neighbors, as previous empirical studies have shown to be the case in both developing (Conley and Udry 2010) and developed countries (Chatzimichael, Genius, and Tzouvelekas 2014). One notable exception is the study by Läpple et al (2017) who, in an effort to overcome a missing neighbor problem, constructed a spatial weight matrix using census data on dairy livestock intensity at the electoral division level and geographic proximity among the sample farms

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