Potato Potahto in the FAO-GAEZ Productivity Measures? Nonclassical Measurement Error with Multiple Proxies

Abstract

The FAO-GAEZ productivity data are widely used in Economics. However, the empirical literature rarely discusses measurement error. We use two proxies to derive analytical bounds around the effect of agricultural productivity in a setting with nonclassical measurement error. These bounds rely on assumptions weaker than those imposed in empirical studies and exhaust the information contained in the first two data moments. We reevaluate three influential studies, finding wide intervals around the effects of agricultural productivity. These results call for caution, highlighting the limits of our knowledge about these effects. Our methodology has broad applications in empirical research involving mismeasured variables.