Online Appendix for “Domestic Trade Frictions and Agriculture”

In this section I characterize the optimal choices of farmers. I discuss the optimal choices of farmers for a plot ω, conditional on allocating a positive fraction of plot ω to the production of crop k, (φi,k (ω) > 0), an event I denote ω ∈ Ωi,k. Then I move on to prove the three main Propositions in the paper. Using Assumptions #1 and #2, I first show how to calculate the fraction of land allocated to crop k. In equilibrium, ω ∈ Ωi,k implies φi,k (ω) = 1, so each plot ω is fully specialized in one crop k. Second, I derive the distributions of land quality, yields, revenue per unit of land, and rents, conditional on ω ∈ Ωi,k. Third, I derive the optimal relation between land shares and revenue shares for a given region.