Group work 4
The main objective for the research was to economically quantify the value of Nepal’s rural agricultural lands, with considerations on the effects that social institutions have on the land values and agricultural productions in those particular areas (Joshi, Ali, & Berrens, 35). Some of the methods that were used as the pricing methods to carry out the survey included the hedonic pricing method through the application of box-cox transformation method in order to be able to reduce the impact of outliers to the data (Joshi, Ali, & Berrens, 42). This is achieved by lessening heteroskedastic and making the residual to be more normal. This was particularly important so as to achieve statistics estimates that are not biased in any way whatsoever. The validation of the pricing models is drawn using the formulated standard procedures of the hedonic pricing model. This approach is particularly in line with the microeconomic theory especially in regards to an irrigation set up in the rural outskirts of Nepal.
A flexible estimation approach was rather used in the identification of the functional form. In addition, robust standard errors were again used in the correction of heteroscedasticity plus errors found in the clusters in every farm division when accounting cross-sectional correlations in different homes. Moreover, test to check for normality of the various errors that could emerge was also done. Such included the VIF test which ascertained that multicollinearity in between the explanatory variables was not a problem at all that one could be concerned with as the estimations where been done. In fact, from the collected data, the mean for the VIF was less than 2 for all the approaches that were applied in the hedonic pricing model. This gave the team a go-ahead to rather go the next which was the calculation of the marginal implicit prices.
While carrying out the research the major assumption used was ceteris paribus, consequently approximating the value irrigated land to be 46% higher than the non-irrigated land (Joshi, Ali, & Berrens, 42). In regards to findings and conclusion, the irrigated land was valued to be 46% higher than non-irrigated land. These findings also validate the emphasis put on set irrigation infrastructure in Nepal such as tube wells. Social institutions such as the landowner membership community also had positive impacts on land values (Joshi, Ali, & Berrens, 35). Also, there was dire need to carry out repairs on the already built irrigation infrastructure caused by severe earthquakes experienced in the country. However, this has not been achieved due to a lack of funds to carry out the repairs. This should be considered especially now when most countries are suffering economically. Just like any other sector, agricultural produce, as well as the related positive impacts it brings along with it such as rising land values, can as well improve the lives of the rural people while still add significantly to the general sector of the economy of Nepal.
Joshi, Janak, Mohammad Ali, and Robert P. Berrens. “Valuing farm access to irrigation in Nepal: A hedonic pricing model.” Agricultural water management 181 (2017): 35-46.