The impact of extension services on farm-level income: An instrumental variable approach to combat endogeneity concerns

A. Cawley, C. O'Donoghue, K. Heanue, R. Hilliard, M. Sheehan

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

Agricultural extension is an important policy instrument utilized to diffuse knowledge and increase profitability among farmers. However, analyses on impact are subject to endogeneity concerns, causing multiple biases. Failure to combat endogeneity can lead to false inferences on impact. This article addresses this issue by applying an instrumental variable approach with distance to local advisory office and a policy change chosen as instruments for extension participation. The results show that participation significantly increased farm income and that OLS estimates underestimated the impact. Therefore, a superior estimate of impact is achieved which can be leveraged to better support accurate policy making.

Original languageEnglish
Pages (from-to)585-612
Number of pages28
JournalApplied Economic Perspectives and Policy
Volume40
Issue number4
DOIs
Publication statusPublished - Dec 2018

JEL classifications

  • q12 - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

Keywords

  • Endogeneity
  • Extension
  • Farm income
  • Instrumental variables
  • Panel data
  • Two-stage least squares estimation
  • MANAGEMENT
  • IRELAND
  • PROPENSITY SCORE
  • panel data
  • ADOPTION
  • two-stage least squares estimation
  • INCENTIVES
  • farm income
  • PROVISION
  • AGRICULTURAL EXTENSION
  • instrumental variables
  • POVERTY
  • PROGRAMS
  • endogeneity

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