Potato Potahto in the FAO-GAEZ Productivity Measures? Nonclassical Measurement Error with Multiple Proxies

Rafael Araujo and Vitor Possebom

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Abstract: The FAO-GAEZ crop productivity data are widely used in Economics. However, the existence of measurement error is rarely recognized in the empirical literature. We propose a novel method to partially identify the effect of agricultural productivity, deriving bounds that allow for nonclassical measurement error by leveraging two proxies. These bounds exhaust all the information contained in the first two moments of the data. We reevaluate three influential studies, documenting that measurement error matters and that the impact of agricultural productivity on economic outcomes may be smaller than previously reported. Our methodology has broad applications in empirical research involving mismeasured variables.

Date: 2025-02, Revised 2025-02
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