Quality versus Quantity Effects of Pesticides: Joint Estimation of Quality Grade and Crop Yield

While the capacity of pesticides to protect output from losses is well established, the contribution of pesticides to prevention of quality damage has been less extensively documented. The relative importance of the quality and quantity effects of pesticides has received even less attention. We investigate the relative effects of the three major classes of pesticides—insecticides, herbicides, and fungicides—on the quantity and quality of output. To do so, we build on our previous work to develop a new econometric estimator for estimating quality and quantity of output simultaneously when quality is measured in terms of discrete grades. We apply that estimator using a panel of data from Japanese wheat production for the period 1995-2006. The estimated parameters of the model indicate that the quality effects of fungicides and fertilizer are substantial: Increases in quality account for two-fifths of the overall marginal revenue product of fertilizer and close to a fifth of the overall marginal revenue product of fungicides. The magnitude of the effect of fertilizer on wheat quality attests to the importance of kernel size and weight in determining grade. Similarly, the magnitude of the effect of fungicides on wheat quality speaks to the importance of disease control in wheat production.