The Effect of the Conservation Reserve Program on Rural Economies: Deriving a Statistical Verdict from a Null Finding

13 Pages Posted: 21 Apr 2020

See all articles by Jason Brown

Jason Brown

Federal Reserve Bank of Kansas City

Dayton M. Lambert

University of Tennessee, Knoxville

Timothy R. Wojan

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS)

Multiple version iconThere are 2 versions of this paper

Date Written: March 2019

Abstract

This article suggests two methods for deriving a statistical verdict from a null finding, allowing economists to more confidently conclude when “not significant” can be interpreted as “no substantive effect.” The proposed methodologies can be extended to a variety of empirical contexts where size and power matter. The example used to demonstrate the methods is the Economic Research Service's 2004 Report to Congress that was charged with statistically identifying any unintended negative employment consequences of the Conservation Reserve Program (CRP). The report failed to identify a statistically significant negative long‐term effect of the CRP on employment growth, but the authors correctly cautioned that the verdict of “no negative employment effect” was only valid if the econometric test was statistically powerful. We replicate the 2004 analysis and use new methods of statistical inference to resolve the two critical deficiencies that preclude estimation of statistical power: (a) positing a compelling effect size, and (b) providing an estimate of the variability of an unobserved alternative distribution using simulation methods. We conclude that the test used in the report had high power for detecting employment effects of ‐1% or lower resulting from the CRP, equivalent to job losses reducing a conservative estimate of environmental benefits by one‐third.

Keywords: Hypothesis testing, Monte Carlo, power analysis

Suggested Citation

Brown, Jason and Lambert, Dayton M. and Wojan, Timothy R., The Effect of the Conservation Reserve Program on Rural Economies: Deriving a Statistical Verdict from a Null Finding (March 2019). American Journal of Agricultural Economics, Vol. 101, Issue 2, pp. 528-540, 2019, Available at SSRN: https://ssrn.com/abstract=3578909 or http://dx.doi.org/10.1093/ajae/aay046

Jason Brown (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States

Dayton M. Lambert

University of Tennessee, Knoxville ( email )

The Boyd Center for Business and Economic Research
Knoxville, TN 37996
United States

Timothy R. Wojan

U.S. Department of Agriculture (USDA) - Economic Research Service (ERS) ( email )

355 E Street, SW
Washington, DC 20024-3221
United States

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