Reducing Self-Selection Bias in Feeder Cattle Premium Estimates Using Matched Sampling

Past value-added research employs hedonic pricing models to estimate premiums associated with value-added feeder cattle characteristics. However, hedonic pricing models require restrictive assumptions and impose a functional form. Producers also self-select into a treatment group, potentially biasing estimates. Using propensity score matching, we reduce potential bias from producer self-selection and from imposing a functional form. Results suggest that hedonic pricing models may be negatively biased in estimates of premiums received by value-added calf producers. Current adopters receive a premium of $5.38/cwt from participation in a certified preconditioning program, while nonadopters would realize $5.17/cwt by adopting certification. Hedonic model values range from $0.52/cwt to $4.32/cwt, for similar or identical preconditioning programs.
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Williams, Brian R.; DeVuyst, Eric A.; Peel, Derrell S.; Raper, Kellie Curry, Reducing Self-Selection Bias in Feeder Cattle Premium Estimates Using Matched Sampling, Journal of Agricultural and Resource Economics, Volume 39, Issue 1, April 2014, Pages 124-138

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