Showing papers in "American Journal of Agricultural Economics in 1984"

Welfare Evaluations in Contingent Valuation Experiments with Discrete Responses

Abstract: Since the work of Bishop and Heberlein, a number of contingent valuation experiments have appeared involving discrete responses which are analyzed by logit or similar techniques. This paper addresses the issues of how the logit models should be formulated to be consistent with the hypothesis of utility maximization and how measures of compensating and equivalent surplus should be derived from the fitted models. Two distinct types of welfare measures are introduced and then estimated from Bishop and Heberlein's data.

The Adoption of Reduced Tillage: The Role of Human Capital and Other Variables

Abstract: This paper presents a model of adoption behavior and explains differences econometrically in farmers' decisions to adopt reduced‐tillage practices and in the efficiency of farmers' adoption decisions. The empirical results, obtained from microdata, show that the probability of adopting reduced tillage in corn enterprises differs widely across farms and depends on soil characteristics, cropping systems, and size of farming operation. The results also show that farmers' schooling enhances the efficiency of the adoption decision.

The Acquisition of Information and the Adoption of New Technology

Abstract: This paper presents a dynamic model of diffusion of a new technology involving a variable input. The model highlights the role of active information accumulation, which entails costs. It generates several hypotheses regarding the likely pattern of adoption and use of the variable input over time by farmers of differing holding sizes and different access to information. It provides a possible explanation to the often observed lag in adoption of innovations by smaller farmers. Analysis of data from India on knowledge and adoption of several practices yields results which are generally consistent with the hypotheses suggested by the theoretical framework.

Allocatable Fixed Inputs and Jointness in Agricultural Production: Implications for Economic Modeling

Abstract: Allocatable fixed inputs, such as land, are a potentially important source of jointness in agriculture. As with other causes of jointness, they necessitate multiple-product systems for modeling product supply and input demand. In other important ways, however, their analytical implications are very different from other causes of jointness. Model specification differs. Demand functions for the quantities of each input used in the production of individual commodities can be derived if a primal approach is used, but such allocation equations cannot in general be identified from a dual specification. Available allocation data are not even useful in such dual estimations.

Implicit Prices of Soil Characteristics for Farmland in Iowa

Abstract: Arguments have long persisted that purchasers pay too much for poor land (i.e., less productive, more erosive) relative to the higher quality counterpart. In other words, purchasers are either irrational or poorly in- formed relative to the differences in land productivity between poor and good farmland. Similar arguments have been advanced concerning the willingness-to-pay rent on the part of tenant operators.

The Fourier Flexible Form

Abstract: One perspective on the recent work in flexible functional forms is that the use of such forms represents an attempt to remove the modelinduced augmenting hypothesis that is inevitably linked to parametric statistical inference. The Fourier flexible form is discussed from this perspective. The discussion relies on heuristic and graphical arguments rather than formal mathematics. The generality of parametric statistical inference is limited by the augmenting hypothesis induced by model specification. For instance, to conclude that rejection of the integrability conditions in a translog consumer demand system implies rejection of the theory of consumer demand requires the augmenting hypothesis that all possible consumer demand systems must belong to the translog family (Christensen, Jorgenson, and Lau). This reliance on an assumed parametric model is not only philosophically distasteful but is of practical importance in applications. Estimators can be seriously biased by specification error; a test can reject a null hypothesis with a probability that greatly exceeds its nominal rejection probability (Gallant 1981). One way to interpret the recent work in flexible functional forms is to see it as the use of richer parametric families of models in an attempt to reduce these two sorts of statistical biases--estimator bias and excess rejection probability. Most of the flexible forms that have appeared in the literature are second-order (or Diewert-flexible) forms. Technically, this means that if g(x) is to be approximated by g(xIO), then at any given point xo there is a corresponding choice of parameters 01 such that

Rural financial markets in developing countries : their use and abuse

Abstract: Until recently the use of agricultural credit as a developmental tool seemed clear and straightforward. Most concerned people believed that increases in the volume of cheap credit were necessary to boost agricultural production, and that the rural poor could be brought into the mainstream of development through supervised credit programs. It seemed that certain ideal types of rural credit institutions offered the promise of meeting farmers' credit needs, and that experience in the industrialized countries with cooperatives and specialized agricultural finance institutions could be effectively transplanted to low-income countries. This collection of readings highlights facets of rural financial markets that have often been neglected in discussions of agricultural credit in developing countries. It moves beyond a narrow concern with the simple provision of credit to a broad consideration of the performance of rural financial markets and of ways to improve the quality and range of financial services for low-income farmers. It reflects new thinking on the design, administration, evaluation and policy framework of rural finance and credit programs in developing countries.

Agricultural and Financial Market Interdependence in the Short Run

Abstract: A theoretical model capable of examining the effects of various monetary policies on agriculture is developed. Results from comparative static experiments with the model show that a restrictive monetary policy may adversely affect agriculture. Results from the theoretical model are compared with earlier studies and are empirically investigated using vector autoregression techniques. In general, empirical analysis supports the theoretical developments.

Relative Prices and Money: A Vector Autoregression on Brazilian Data

Abstract: Recent data on Brazilian agricultural prices, industrial prices, and money supply are analyzed in a vector autoregression. The empirical findings show strong, one-way, Granger-type causality from money supply to agricultural prices; while feedback is observed between industrial prices and money supply. Under the usual monetarist ordering of contemporaneous innovation covariance, agricultural prices do not adjust faster than industrial prices to a shock in the money supply.

The Structure of U.S. Agricultural Technology, 1910–78

Abstract: This paper utilizes 1910-78 time-series data and a single product aggregate translog profit function to measure the structure of U.S. agricultural technology. Duality relations are used to devise a multifactor measure of biased technical change. A measure of nonhomotheticity is introduced which indicates the effects scale change has had on aggregate cost shares. The empirical analysis finds that different, nonhomothetic technologies characterized the prewar and postwar periods. Differing technical change biases are consistent with relative price trends during the two periods, showing that the long-run structure of U.S. agricultural technology has been consistent with the Hayami-Ruttan induced innovation theory.

Estimating Substitution and Expansion Effects Using a Profit Function Framework

Abstract: This study reports a first attempt to derive all the relevant information with respect to the structure of production of an industry using knowledge of only a profit function. Using estimates of a profit function for Canadian agriculture, a procedure to separate substitution and expansion effects for both inputs and outputs was implemented. Information concerning net input and output substitution and complementarity possibilities were obtained. The most important empirical results suggest that the hypothesis of nonjoint production of crop and animal outputs in Canadian agriculture cannot be rejected, and that hired and operator labor are complements rather than substitutes.

The Gains from Research into Tradable Commodities

Abstract: This paper develops a model for assessing the aggregate level and distribution of the benefits of reseach into tradable commodities. It estimates gains to Australia and to the rest of the world from research into the wool and wheat industries.

An Econometric Model of Cattle Inventories

Abstract: Dynamic regression equations are estimated for each beef cattle breeding herd and beef cattle inventories at two levels of aggregation, the U.S. and Montana. The analysis for Montana was utilized as a guide for specification of the national equation to reduce the inference problem associated with letting the sample data help specify the model. Rational lags on average price received by farmers for calves and the ratio of fed beef to corn prices at Omaha constitute the primary explanatory variables. The equations perform exceedingly well over the sample period (1950–80) and in post‐sample forecasts with the sample truncated back to 1970.

Sources of Increased Instability in Indian and U.S. Cereal Production

Abstract: Recent growth in Indian and U.S. cereal production has been accompanied by a more than proportional increase in the standard deviation of production. This study applies variance decomposition procedures to state data on crop production to analyze the sources of this increased instability. It is found that production has become significantly more covariate between states and crops, largely because of increased yield variability and a loss in offsetting patterns of variation between crop yields in different states. These changes may be associated with more variable prices, with higher-yielding technologies, and with a narrowing of the genetic base.

A Hedonic Price Model for Rough Rice Bid/Acceptance Markets

Abstract: Several quality factors are important in valuing rough rice. This paper first evaluates the ability of federal grades to explain these factors. Second, the discounts associated with various quality factors are estimated. Finally, the factors affecting acceptance of a bid are investigated. The results indicate grades are useful but inadequate in explaining observed quality differentials. The major quality factor in determining price was head yield. Stinkbug damage was the most important quality factor of those that producers could control. The probability of acceptance increased with higher than expected bids, smaller lot sizes, more bidders, and as the marketing season progressed.

Commodity Prices and Money: Lessons from International Finance

Abstract: Many commodity prices have been falling rapidly recently. As of Thursday, 31 July 1984 the Journal of Commerce's Index for Raw Industrial Materials had declined 10% relative to March and 20% relative to its peak value in 1980. In the current lull between political conventions this counts as something of a hot topic in Washington. Some "supply-siders" like Alan Reynolds (from Jude Wanniski's firm Polyconomics) are warning that the large decline in commodity prices is signalling a general deflation throughout the economy, and the possibility of widespread defaults reminiscent of the 1930s. Congressman Jack Kemp wants the Federal Reserve Board to adopt a monetary policy rule that would automatically expand whenever commodity prices are low, as now, and automatically contract whenever commodity prices are high, as in the late 1970s. There has even been talk about embodying such a monetary rule as a plank in the Republican Party platform in Dallas this month. Seldom before have steel scrap, cotton, and hides seemed so glamorous. My topic today is the determination of the prices of basic commodities, everything from agricultural commodities to the gold and other metals so precious to the supply-siders.

The Welfare Implications of Minimum Quality Standards

Abstract: Previous analysis of the social welfare implications of minimum quality standards has yielded no decisive results. In this paper the specific nature of consumer and producer responses to quality standards is incorporated into the analysis. Both consumer and producer gains are shown to be impossible when consumers can perceive quality before purchase, even if low quality produce is diverted to secondary markets. Standards unambiguously reduce net social benefits. The paper explores the possibility that minimum quality standards are a form of rent-seeking behavior.

Land Prices and Farm-Based Returns

Abstract: The theoretical and empirical relationship between farm-based residual returns, the opportunity cost of farmland, and farmland prices is developed. Temporal hypotheses concerning the source of land price movements are tested using a variant of Granger causality. In the aggregate, farmland prices are found to be unidirectionally "caused" by residual farm-based returns. The findings support the hypothesis that farmland prices are determined mainly within the farm sector and lend credence to the use of extrapolative expectations processes in structural farmland price models.

Measuring Stochastic Technology: The Case of Tulare Milk Production

Abstract: The flexible moment-based approach to production analysis is used to measure the stochastic structure of large-scale dairy production in Tulare County, California. This approach is flexible because it does not impose restrictions on the relationships between decision variables and the moments of the probability distribution of output. The parameter estimates support the hypothesis that second and third moments are functions of inputs and indicate that capital-intensive dairies are riskier. The implied behavior of a risk-averse dairy manager changed markedly when the effects of inputs on the skewness of the output distribution were included in a decision model.

The Village Against the Center: Resource Depletion in South Asia

Abstract: We are interested in the institutional environment that defines the resource-use behavior of villagers in South Asia. It is that environment-consisting of the conventions, norms, and rules-that dictates daily behavior with respect to the natural resource base on which villagers are so dependent. Our title emphasizes tension between the village level and the "center." It is our hypothesis that this tension has been ignored in much of the literature on development in general and particularly in that literature concerned with the role of natural resources in economic development.

Increasing Food Production in Sub-Saharan Africa: Environmental Problems and Inadequate Technological Solutions

Abstract: Evaluates the technical and social conditions of agriculture and the technological innovations to increase food production in Sub-Saharan Africa. Environmental constraints to agriculture; Farming system and its technical needs; Problems of irrigation projects; Reason for the limited use of mulches in sorghum and millet production.

Marketed Surpluses of Agricultural Households in Sierra Leone

Abstract: An agricultural household model is used with household level data from Sierra Leone to estimate elasticities of marketed surplus for several outputs and for labor with respect to price and nonprice variables. Positive own-price elasticities are found, with magnitudes considerably above own-price output elasticities. Changes in household characteristics and production technology also affect marketed surpluses but not always in anticipated directions. Elasticities are reported for households when grouped by their total expenditure, not just for the sample mean. The differences are important, showing that low expenditure households respond as much as high expenditure households.

Traditional Agricultural Knowledge: Past Performance, Future Prospects, and Institutional Implications

Abstract: Whether as economists concerned with agricultural development or conservationists concerned with sustaining the services of environmental systems, we have been of multiple minds with respect to traditional agricultural practices and their supporting cultural systems. Traditional knowledge has been viewed as part of a romantic past, as the major obstacle to development, as a nonissue, as a necessary starting point, and as a critical component of a cultural alternative to modernization. Only very rarely, however, is traditional knowledge treated as knowledge per se in the mainstream of the agricultural development and environmental management literature, as knowledge that contributes to our understanding of agricultural production and the maintenance and use of environmental systems. Our views have an extended romantic antecedent. But with modernization we rather

Impacts of Productivity Loss on Crop Production and Management in a Dynamic Economic Model

Abstract: A major consequence of more intensive agricultural production has been increased soil erosion from cropland. Soil loss rates that exceed the rates of soil genesis will inevitably reduce soil productivity in the long run. Both the popular press and scientific publications contain expressions of concern that cropland erosion will threaten our ability to meet longrun demands for food at reasonable prices. Given the current state of knowledge, cropland erosion rates in the major crop-producing

Market Integration: An Application to International Trade in Cotton

Abstract: Agricultural commodities are differentiated frequently by quality or country of origin. This paper proposes two complementary tests-bivariate price regressions and hedonic index estimation-as methods to identify whether differentiated products are amenable to treatment as a homogenous commodity. These price linkage tests represent necessary, rather than sufficient, conditions for aggregation and must be supplemented by information on market structure. Analysis of the international cotton market suggests a distinction between extra long and other staple lengths, but not by country of origin after controlling for staple length.

A Structural View of Policy Issues in African Agricultural Development

Abstract: We respond to the comment by Schiff on our 1984 invited paper along three lines. First, we clarify points that appear to have been misunderstood. Second, we emphasize our disagreement with several aspects of Schiff's position that find particular currency within a small, but not negligible, portion of the donor community. Foreign assistance was equal to nearly two-thirds of gross domestic investment in the low income economies of Sub-Saharan Africa in 1984 and 13% of gross domestic investment for the region as a whole (World Bank 1984, 1986); the opinions of donors matter in Africa. Third, we use the opportunity to refocus the debate on the real issue of steps to improve agricultural investment in Africa. We feel that a critical mass of national and donor agency policy makers have made this transition but that we as an academic community have done relatively little in recent years to assist them.

Near-Optimal Management Strategies for Controlling Wild Oats in Spring Wheat

Abstract: Near-optimal multiperiod decision rules for controlling wild oats in spring wheat in north central Montana are presented in this paper. Decision alternatives are fallow, use of a preemergent or postemergent herbicide, and crop without use of a herbicide. The near-optimal decision rules, which were obtained from a partially decomposed stochastic dynamic programming model, depend on density of wild oats seed in the plow layer, whether the land was previously cropped or fallow, soil moisture level, price of spring wheat, and post-planting density of wild oats. This paper presents near-optimal multiperiod decision rules for management of wild oats in spring wheat in north central Montana. Decision rules are obtained from a partially decomposed stochastic dynamic programming (DP) model. Decision alternatives considered are fallow, use of a preemergence herbicide, use of a postemergence herbicide, and crop without use of a herbicide. State variables in the model are (a) density of wild oats seed in the plow layer, (b) whether the land was previously cropped or fallow, (c) soil moisture level if a crop was grown the previous year, and (d) the price of spring wheat. For use of a postemergence herbicide, an additional state variable is the post-planting density of wild oats. Emphasis of the model is on wild oats management, but the model also embodies the notion of flex cropping of spring wheat in response to soil moisture, price, and wild oats infestations.' The model is similar to a deterministic DP model formulated by Fisher and Lee for wheat production in Australia in the sense that it accounts for wild oats population dynamics, but it is different in the sense that it accounts for stochastic elements and allows for use of a preemergent herbicide as a decision alternative. Organization of the paper is as follows: the next section gives a brief background on the extent of the wild oats problem and characterizes the management problem. This general discussion is followed by specification of a wild oats model, which is followed by presentation of a decomposed DP optimization model. Then statistical results for the model and near-optimal decision rules are presented. Finally, suggestions for future research are stated.

Range Management under Uncertainty

Abstract: The problem of rangeland management is modeled as a stochastic control problem. The manager periodically chooses stocking rates and decides whether to use a treatment which improves the rangeland. His decisions have an uncertain impact on the rangeland. The theory of finite Markov chains is used to analyze the solution to the control problem. The stochastic specification of the model is varied to test the sensitivity of the optimal policies. These are quite robust except at certain levels of the range condition. Cases of a risk-neutral and risk-averse manager are studied.

Social Science Knowledge and Institutional Change

Abstract: Over the last several decades agricultural economists have made major contributions to our understanding of the impact of advances in natural science knowledge on technical change and of the impact of technical change on economic growth. We have also significantly advanced our understanding of the sources of demand for and supply of technical change. Work carried out within the framework of the induced technical change paradigm has demonstrated that technical change can be treated as largely endogenous to the development process (Hayami and Ruttan 1971, Binswanger and Ruttan). We have made less progress in our attempts to understand the contributions of advances in social science knowledge to institutional innovation or of the contribution of institutional innovation to economic, political, or social change. And our knowledge of the sources of demand for and supply of institutional change remains rudimentary. In this paper I suggest an approach to thinking about the sources of demand and supply for institutional change. I then proceed to explore the use of social science knowledge, and the role of social scientists, in the design and evolution of institutional innovations. Finally, I examine the contribution of agricultural economics research and of agricultural economists to the design and evolution of the "direct payment" approach to farm price and income policy. I follow the lead of Commons and Knight and define institution to include both the behavioral rules that govern patterns of relationships and action as well as decision-making units such as government bureaus, firms, and families. The term institutional change will at times be used to refer to both institutional innovation and to changes in institutional performance.I