Economic Policy and Technology Choice of Heterogeneous Producers

authored by

Michael Hübler, Gregor Schwerhoff

Abstract

This article introduces a new Hopenhayn-Melitz-type model of heterogeneous producers with endogenous technology choice. Different from previous trade models, it describes smallholder producers in rural areas of developing countries in the context of environment and development economics. Shocks (climate change) and various policies affect the producers’ endogenous choice between market entry or exit and between simple or advanced technology. This adds new margins of adjustment to models used in this context. Based on these mechanisms, the theoretical analysis identifies a novel type of the rebound effect via market entry. The numerical application to coffee production in rural Vietnam shows that secondary effects of the shocks, such as changes in the number of producers, can be larger than the original impact. Technology-supporting policies can have unintended detrimental side effects on less productive producers.

Organisation(s)

Institute of Environmental Economics and World Trade

External Organisation(s)

Justus Liebig University Giessen
Mercator Research Institute on Global Commons and Climate Change (MCC)
International Monetary Fund

Type

Article

Journal

Journal of the Association of Environmental and Resource Economists

Volume

10

Pages

1369-1404

No. of pages

36

ISSN

2333-5955

Publication date

09.2023

Publication status

Published

Peer reviewed

Yes

ASJC Scopus subject areas

Economics and Econometrics, Nature and Landscape Conservation, Management, Monitoring, Policy and Law

Sustainable Development Goals

SDG 13 - Climate Action

Electronic version(s)

https://doi.org/10.1086/724517 (Access: Closed)