Using pre‐ and post‐entry data to identify the effect of ethanol plant entry on the spatial pattern of corn prices: A study in Indiana

Abstract We estimate the long‐run effect of ethanol plant entry on local corn prices using a long‐horizon difference‐in‐differences framework that combines matching with fixed effects while explicitly accounting for treatment intensity and spatial heterogeneity. We find that entry by an ethanol plant with average capacity relative to local corn supply raises nearby corn prices by approximately 17 cents per bushel. Treatment effects differ substantially across plants: price effects vary little among plants with below‐average capacity but increase sharply as plant capacity rises relative to local corn supply. Price effects also extend beyond 30 miles from the entrant, highlighting the importance of accounting for spatial heterogeneity when evaluating localized demand shocks. The results are robust to matching on pre‐treatment determinants of plant location, excluding a high‐price outlier county, and alternative approaches to accounting for spatial dependence in statistical inference.