INTERTEMPORAL AND INTERFIRM HETEROGENEITY - IMPLICATIONS FOR PESTICIDE PRODUCTIVITY

This paper presents evidence concerning the existence and implications of heterogeneity effects for estimates of the marginal productivity o f pesticides. The paper extends the work of Carpentier and Weaver (199 6a), which considered fixed effects that homothetically shift the cond itional mean of output. This paper considers the implications of time- varying marginal productivity, allowing for nonhomothetic shifts in pr oduction. The extent and structure of heterogeneity found in French cr op agriculture is first presented to illustrate that persistent hetero geneity exists across these firms. Next, we review the implications of such heterogeneity for econometric estimates and show that estimates of marginal productivity of pesticides will be biased when based on mo dels that do not explicitly account for these types of heterogeneity a cross firms and time. An alternative estimation approach is proposed, based on Chamberlain (1982 and 1984) and implemented to produce asympt otically unbiased estimates and to statistically validate the model sp ecification. Existence of fixed firm effects is statistically confirme d and temporal variation of marginal productivity is found to be subst antial.