Shocks, economic policy and technology choice of heterogenous producers

Michael Hübler and Gregor Schwerhoff

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: This article introduces a new Melitz-type model of heterogeneous producers with decreasing returns to scale and different productivities. Different to previous models, it describes smallholder producers in rural areas of developing countries in the context of environment and development economics. The model enables a socially sensitive policy analysis considering poverty and distributional effects. In this model, the production input causes a negative environmental externality. External shocks, e.g., caused by climate change, and economic policies affect the producers' endogenous choice between market entry or exit and between simple or advanced technology. In the first step, various shocks and policies are analyzed theoretically. A novel type of the rebound effect (Jevons paradox) is identifed for the production input that occurs when market entry is incentivized by productivity improvements. In the second step, the model is calibrated by applying it to coffee production in rural Vietnam. The simulation results show that secondary effects of the shocks, such as employment effects, can be substantially larger than the original impact. The support of market entry or of the advanced technology creates adverse distributional effects.

Keywords: heterogeneous producers; technology choice; climate change; coffee; Vietnam (search for similar items in EconPapers)
JEL-codes: F63 O33 Q12 Q17 Q54 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2019-06
New Economics Papers: this item is included in nep-agr, nep-env and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://diskussionspapiere.wiwi.uni-hannover.de/pdf_bib/dp-655.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-655

Access Statistics for this paper

More papers in Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät Contact information at EDIRC.
Bibliographic data for series maintained by Heidrich, Christian ().