Modeling Corners, Kinks, and Jumps in Crop Acreage Choices: Impacts of the EU Support to Protein Crops

Abstract

Null crop acreages raise pervasive issues when modeling acreage choices with farm data. We revisit these issues and emphasize that null acreage choices arise not only due to binding non‐negativity constraints but also due to crop production fixed costs. Based on this micro‐economic background, we present a micro‐econometric multicrop model that consistently handles null acreage choices and accounts for crop production fixed costs. This multivariate endogenous regime switching model allows for specific crop acreage patterns, such as multiple kinks and jumps in crop acreage responses to economic incentives that are due to changes in produced crop sets. We illustrate the empirical tractability of our modeling framework by estimating a random parameter version of our model on a panel dataset of French farmers. The estimated model is used to simulate the impacts of area‐based subsidies on protein peas, which are implemented by the EU for reducing its dependence on imported protein crops. Our results suggest that this subsidy scheme is effective, essentially by leading farmers to incorporate or to keep protein pea in their crop mix.