Saturday, January 22, 2011

Possible interesting solution to distance to market mystery

I haven't been able to sleep these last two nights for thinking about why distance to market might increase rent (ie has a positive sign in the regression). I posted something about this mystery a few days ago. I think the solution might be connected with perceptions of risk. Farmers who face stable long-term conditions with regard to climate can generally out-bid farmers who are concerned only about the short-term. Folks with deep pockets can wait out the troughs because they aren't so worried about bringing home food to their family every single day. They can store food or buy it. So it is possible that the unusual pattern of a positive sign might be caused by highly variable weather conditions in that location. So I need to go back over metereological records and calculate the coefficients of variation for temperature and rainfall in various parts of the southwest. I'll put the numbers into the regression and see what happens. This is fun!

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