TY - JOUR

T1 - Economic Policy and Technology Choice of Heterogeneous Producers

AU - Hübler, Michael

AU - Schwerhoff, Gregor

N1 - Funding Information: its Executive Board, or its management. We are very grateful to three anonymous reviewers and editor Shanjun Li for many helpful comments. We thank Nguyen Duy Linh for his extremely helpful and inspiring advice on Vietnamese coffee production. We thank Oliver Schulte, Martin Petrick, and Franziska Bock at GIZ (German organization for international cooperation) for helpful comments, Judith Soto for proofreading, and Ulrike Grote, Thanh Tung Nguyen, and Nguyen Duy Linh for providing useful information. This article has benefited from presentations at the annual conference of the Canadian Economics Association in Banff and a project workshop in Potsdam in 2019. We gratefully acknowledge financial support by the German Federal Ministry of Education and Research (BMBF, project ROCHADE, grant 01LA1828C). Regarding the inspected supplementary data, we acknowledge financial support by the German Research Foundation (DFG) within the project FOR 756 and thank our collaborators involved in the project management, data collection, and data provision.

PY - 2023/9

Y1 - 2023/9

N2 - 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.

AB - 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.

KW - climate change

KW - coffee

KW - heterogeneous producers

KW - technology choice

KW - Vietnam

UR - http://www.scopus.com/inward/record.url?scp=85172282141&partnerID=8YFLogxK

U2 - 10.1086/724517

DO - 10.1086/724517

M3 - Article

AN - SCOPUS:85172282141

VL - 10

SP - 1369

EP - 1404

JO - Journal of the Association of Environmental and Resource Economists

JF - Journal of the Association of Environmental and Resource Economists

SN - 2333-5955

IS - 5

ER -