Showing papers in "American Journal of Agricultural Economics in 1998"
TL;DR: This article examined an extension or variant of contingent valuation, the choice experiment, which employs a series of questions with more than two alternatives that are designed to elicit responses that allow the estimation of preferences over attributes of an environmental state.
Abstract: The measurement of passive use values has become an important issue in environmental economics. In this paper we examine an extension or variant of contingent valuation, the choice experiment, which employs a series of questions with more than two alternatives that are designed to elicit responses that allow the estimation of preferences over attributes of an environmental state. We also combine the information from choice experiments and contingent valuation to test for differences in preferences and error variances arising from the two methods. Our results show that choice experiments have considerable merit in measuring passive use values.
1,520 citations
TL;DR: In this article, the authors decompose the production impacts of income support programs into wealth, insurance, and coupling effects, and conclude that studies of trade and domestic policy reform in stochastic environments should consider insurance and wealth effects.
Abstract: This analysis decomposes the production impacts of income support programs into wealth, insurance, and coupling effects. Under the usual assumptions about preferences, the wealth and insurance effects of many support programs increase optimal input levels even for supposedly decoupled programs. If the program is “coupled” in the usual sense, then all three effects often act in the same direction. It is concluded that studies of trade and domestic policy reform in stochastic environments should consider insurance and wealth effects. The derivative conditions required to obtain results are also subjected to scrutiny. Simulations for an Iowa corn producer confirm the comparative statics.
492 citations
TL;DR: The choice between organic and conventional produce was estimated empirically using a two-equation probit model using data collected in-store on cosmetic defects, produce prices, and consumers' demographic and economic traits as mentioned in this paper.
Abstract: The choice between organic and conventional produce was estimated empirically using a two-equation probit model. Data were collected in-store on cosmetic defects, produce prices, and consumers' demographic and economic traits. Store choice displayed a significant impact on the probability of purchasing organic produce. Shoppers at the specialty grocer were sensitive to price differences between organic and conventional items. Households with children under eighteen were more likely to purchase organic produce while shoppers with graduate or professional degrees were less likely to do so. Differences in cosmetic defects had statistically significant albeit small effects on the probability of purchasing organics.
390 citations
340 citations
TL;DR: In this article, costly exchange is incorporated into an agricultural household model, and a numerical nonseparable version of the model is used to show that seemingly inefficient cropping choices of this type in Siaya District, Kenya, can be explained as rational food import substitution given high transport costs in product markets.
Abstract: Smallholders regularly devote shares of resources to low-yielding food crops than they do to cash crops that have higher market returns. In this paper, costly exchange is incorporated into an agricultural household model, and a numerical nonseparable version of the model is used to show that seemingly inefficient cropping choices of this type in Siaya District, Kenya, can be explained as rational food import substitution given high transport costs in product markets. Improved rural road networks that reduce these costs could abate motives to meet food needs through domestic production and promote specialization that raises farm incomes.
319 citations
TL;DR: In this paper, a polychotomous choice model is applied to the choice of alternative management practices on cropland in the Central Nebraska Basin and controlled for self-selection and the interaction between alternative practices.
Abstract: Farmers' management practices can have a significant effect on agricultural pollution. Past research has analyzed factors influencing adoption of a single management practice. But often adoption decisions about many practices are made simultaneously, which suggests use of a polychotomous-choice model to analyze decisions. Such a model is applied to the choice of alternative management practices on cropland in the Central Nebraska Basin and controlled for self-selection and the interaction between alternative practices. The results of the choice model are used to estimate the economic and environmental effects of adopting alternative combinations of management practices.
296 citations
TL;DR: In this paper, a method, CVM-X, is proposed to calibrate hypothetical survey values using experimental auction markets, and the results show that calibration factors for those who favor the irradiation process (0.67-0.69) are less severe than for those with an initial dislike of the process.
Abstract: We design and implement a method, CVM-X, to calibrate hypothetical survey values using experimental auction markets. We test the procedure using consumer willingness-to-pay for irradiated/nonirradiated meat. Our results show that calibration factors for those who favor the irradiation process (0.67–0.69) are less severe than for those with an initial dislike of the process (0.55–0.59), suggesting that calibration may be commodity specific.
294 citations
TL;DR: This article shows how to recover flexible cost functions from very limited data sets using a maximum entropy approach and argues that there exists a continuum of analysis between mathematical programming and traditional econometric techniques which is based solely upon the available information.
Abstract: Production economics problems are often ill-posed. This means that the number of parameters to be estimated is greater than the number of observations. In this article we show how to recover flexible cost functions from very limited data sets using a maximum entropy approach. We also argue that there exists a continuum of analysis between mathematical programming and traditional econometric techniques which is based solely upon the available information. The limiting case of a multi-output cost function recovered using only a single observation of a farmer's allocation decisions can be easily extended to handle more than one observation.
289 citations
TL;DR: In this article, nonparametric density estimation procedures were used to evaluate county-level crop yield distributions and their implications for rating area-yield crop insurance contracts were discussed, and the procedures developed are used to measure yield risk and calculate insurance premium rates for wheat and barley in the 1995-96 Group Risk Program.
Abstract: We use nonparametric density estimation procedures to evaluate county-level crop yield distributions. Implications for rating area-yield crop insurance contracts are discussed. The procedures developed are used to measure yield risk and calculate insurance premium rates for wheat and barley in the 1995-96 Group Risk Program.
280 citations
TL;DR: A major issue in this debate concerns the effect of scientific plant breeding technology on crop genetic diversity, which is believed to have important implications for global and national food security and producer welfare.
Abstract: The ability to meet the world’s growing food demand dramatically improved with the release of modern semidwarf or “green revolution” wheat varieties in the early 1960s. Despite initial and subsequent success in improving yield potential and yield stability, maintaining disease resistance, and improving other plant characteristics, the green revolution has provoked criticism and debate. A major issue in this debate concerns the effect of scientific plant breeding technology on crop genetic diversity, which is believed to have important implications for global and national food security and producer welfare.
198 citations
TL;DR: The authors used a multimarket spatial-equilibrium model to examine the effect of further liberalization on regional rice prices and found that although rice export liberalization would raise food prices and exacerbate regional inequality, it would also increase average real income and reduce (slightly) the incidence and severity of poverty.
Abstract: Vietnam has rapidly become one of the three largest rice exporters in the world, in spite of a binding export quota. This article uses a multimarket spatial-equilibrium model to examine the effect of further liberalization on regional rice prices. Household data are then used to calculate the welfare impact of these price changes on different household groups. The results suggest that although rice export liberalization would raise food prices and exacerbate regional inequality, it would also increase average real income and reduce (slightly) the incidence and severity of poverty. We explore several explanations of these apparently paradoxical results.
TL;DR: This paper developed an integrated framework for testing theories of consumption behavior by examining how agricultural households in rural India respond to anticipated and unanticipated seasonal income fluctuations using information on village-level rainfall surprises.
Abstract: We develop an integrated framework for testing theories of consumption behavior by examining how agricultural households in rural India respond to anticipated and unanticipated seasonal income fluctuations. Using information on village-level rainfall surprises, we estimate idiosyncratic unanticipated income shocks by allowing weather risk to impact households differently depending on observable characteristics. In applying our methodology to unique panel data on consumption, debt, and intrahousehold gift exchanges, we address a number of shortcomings in previous tests of theories of consumption behavior. Yet, we find no evidence against the hypothesis that households smooth idiosyncratic fluctuations in their income. Our approach also uncovers several interesting features of rural credit and insurance markets.
TL;DR: A unified approach for doing sensitivity analysis in equilibrium displacement models is presented that extends the existing method and overcomes many of its deficiencies.
Abstract: In this article a unified approach for doing sensitivity analysis in equilibrium displacement models is presented that extends the existing method and overcomes many of its deficiencies. An empirical example from Gardner's seminal article highlights the advantages of the approach presented here.
TL;DR: In this paper, the authors present a methodology to estimate harvest sector efficiency gains in lieu of incomplete fleet restructuring in the Mid-Atlantic surf clam and ocean quahog fishery ITQ program.
Abstract: Delayed fishing fleet restructuring complicates the assessment of efficiency gains from individual transferable quota (ITQ) fisheries management programs. This article presents a methodology to estimate harvest sector efficiency gains in lieu of incomplete fleet restructuring. The methodology is applied to assess the efficiency gains in the Mid-Atlantic surf clam and ocean quahog fishery ITQ program. While roughly 128 vessels harvested clams under the previous management regime, the analysis suggests that 21–25 vessels will remain under lTQs. The efficiency gains are estimated to be between $11.1 million and $12.8 million annually (1990 dollars).
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TL;DR: In this article, the authors investigated the cost of delivering manure nutrients from Iowa swine production for two forms of manure storage, two target nutrients, two crop rotations, and two levels of field incorporation.
Abstract: What to do about livestock odor and manure nutrients is one of the most contentious policy issues facing agriculture today. The impact of policies designed to address these issues depends, in part, on the on-farm cost of alternative manure handling facilities. This investigation considers the cost of delivering manure nutrients from Iowa swine production for two forms of manure storage, two target nutrients, two crop rotations, and two levels of field incorporation. Many studies have found that manure applications based on phosphate, rather than nitrogen, increases delivery costs. While we agree costs may initially increase, this investigation shows that deliveries based on phosphate can better match crop nutrient need, hence lead to higher profits from manure operations.
TL;DR: In this paper, the authors developed a bioeconomic model of the coho salmon fishery and derived the value of information from improved El Nino forecasting ability, finding that a perfect forecast results in an annual welfare gain of approximately $1 million, while imperfect forecasts lead to smaller gains.
Abstract: The El Nino-Southern Oscillation (ENSO) is the largest source of interannual variability in global climate. Variability in climate has been linked to variability in fisheries, specifically salmon stocks of the Pacific Northwest. The ability to forecast El Nino events already exists and is likely to improve in coming years. An accurate prediction may have value because it allows for better management decisions. In this article, we develop a bioeconomic model of the coho salmon fishery and derive the value of information from improved El Nino forecasting ability. We find that a perfect El Nino forecast results in an annual welfare gain of approximately $1 million, while imperfect forecasts lead to smaller gains. Results also suggest that optimal management in the face of uncertainty involves a “conservative” management strategy, resulting in lower harvest, higher wild fish escapement, and lower hatchery releases than management in the absence of such uncertainty.
TL;DR: A more recent approach to dealing with the contemporaneous correlation problem is the so-called structural factorization, following the similar approaches of Bernanke and Sims as mentioned in this paper, which models data on X, Y, and Z as a vector autoregression.
Abstract: Such studies say little about contemporaneous relationships among the variables X, Y, and Z. If one models data on X, Y, and Z as a vector autoregression, some assumption about contemporaneous correlation between innovations must be made. Early work applied the Choleski factorization, which is a recursive ordering between X, Y, and Z: XYZ. A more recent approach to dealing with the contemporaneous correlation problem is the so-called structural factorization, following the similar approaches of Bernanke and Sims. A problem with the former (Choleski) is that the world might not be recursive (Cooley and LeRoy, Sims). A problem with the latter is tha correct structural information might be unknown outside of a particular deductive model.
TL;DR: In this paper, a simple model linking infection risk from imports to a tariff was presented, where the risk causes the exporter of the infected product to face a higher tariff than would otherwise be the case.
Abstract: We present a simple model linking infection risk from imports to a tariff. The risk causes the exporter of the infected product to face a higher tariff than would otherwise be the case. A numerical example is developed for U.S. beef imports from nations with Foot-and-Mouth Disease (FMD). The additional tariffs are sensitive to the specification of risk and the expected magnitude of loss due to an FMD outbreak. For a low risk of importing FMD, the tariffs levied against the exporter of FMD-infected beef are not prohibitive but become so as the risk or expected output loss rises.
TL;DR: In this article, a procedure that corrects for selectivity bias is proposed to estimate demand functions using cross-sectional data under the assumption that prices vary across households, which includes a two-equation system of expenditure and unit value functions.
Abstract: A procedure that corrects for selectivity bias is proposed to estimate demand functions using cross-sectional data under the assumption that prices vary across households. This procedure, which extends the work by Cox and Wohlgenant, includes a two-equation system of expenditure and unit value functions. This model is applied to household expenditures for beef steaks and roasts.
TL;DR: Certification of organic products serves three functions: it assures consumers that a product that is not observably different from nonorganic food was grown, processed, and packaged according to rules that limit or ban synthetic inputs and that protect the environment.
Abstract: Certification of organic products serves three functions. First, it assures consumers that a product that is not observably different from nonorganic food was grown, processed, and packaged according to rules that limit or ban synthetic inputs and that protect the environment. Second, it assures producers that unscrupulous use of the term organic does not defraud them of price premiums and market share that can be earned from certified foods.
TL;DR: In this paper, the performance of individual farm yield and area yield crop insurance programs is evaluated for a representative Iowa corn farm using numerical optimization of expected utility and simulation techniques, including the nature of the yield index which triggers insurance payouts, alternative restrictions on coverage levels, and alternative pricing structures.
Abstract: The performance of individual farm yield and area yield crop insurance programs is evaluated for a representative Iowa corn farm using numerical optimization of expected utility and simulation techniques. Several different contract design features are studied, including the nature of the yield index which triggers insurance payouts, alternative restrictions on coverage levels, and alternative pricing structures. Performance is evaluated in terms of impacts on farmer participation and welfare and is examined in a portfolio setting where futures and options are also available to farmers. The relative performance of different crop insurance designs is found to be particularly sensitive to restrictions on coverage levels, the size of premium loadings, and the degree to which individual farm yields are correlated with area yields.
TL;DR: In this article, the authors apply an ordered response discrete choice model to explicitly model the range in rental rates over which the representative farmer may be ambivalent to renewing the conservation reserve program (CRP) contract.
Abstract: Given that the majority of conservation reserve program (CRP) contracts on approximately 36
million acres of enrolled land expire concurrently, re-enrollment decisions by farmers and the
federal government have high budgetary implications. Using a survey of over 8,000 CRP contract holders, we apply an ordered response discrete choice model to explicitly model the range in rental rates over which the representative farmer may be ambivalent to renewing the CRP contract.
Given the empirical results from the ordered response model, we estimate acreage re-enrollment as a function of the rental rate and compare them to results of a binomial choice model.
TL;DR: The origins of modern organic agriculture are generally attributed to the writings in the 1940s of Sir Albert Howard and Lady Eve Balfour, which espoused that the health of plants, soil, livestock, and people are interrelated as mentioned in this paper.
Abstract: The beginnings of modern organic agriculture are generally attributed to the writings in the 1940s of Sir Albert Howard and Lady Eve Balfour, which espoused that the health of plants, soil, livestock, and people are interrelated. It followed that farming practices should work in harmony with nature using inputs produced on farm. Organic agriculture was popularized in the United States by J.I. Rodale through the magazine Organic Farming and Gardening. Rodale advocated an approach to farming based on understanding and working with natural systems rather than attempting to control them. In the late 1940s and into the 1950s, chemical intensive agriculture successfully boosted agricultural productivity at relatively low cost, thus diverting attention away from the organic movement. However, the publication in 1962 of Rachel Carlson's Silent Spring gave rise to environmental consciousness and a renewed focus on
TL;DR: In this article, the authors developed an approach to decompose farmland price time series into three uncorrelated components: permanent fundamental component, temporary fundamental component and non-fundamental component.
Abstract: We develop an approach to decompose farmland price time series into three uncorrelated components: permanent fundamental component, temporary fundamental component, and nonfundamental component. This decomposition is useful for studying the importance of fundamental versus nonfundamental factors in explaining farmland price behavior and the dynamic response of farmland prices to shocks to each of these components. The approach is applied to annual Iowa farmland prices over the 1922–94 sample period. We find that fads and overreactions play important roles in explaining short-run price behavior, while long-run price movements are explainable by permanent fundamental shocks.
TL;DR: Three attributes of rural America reflect its fundamental nature: (a) a relatively sparse population, (b) its interdependence with urban and global systems, and (c) its enormous diversity as mentioned in this paper.
Abstract: Three attributes of rural America reflect its fundamental nature: (a) a relatively sparse population, (b) its interdependence with urban and global systems, and (c) its enormous diversity. These attributes are frequently neglected in rural studies work; when they are not recognized, conclusions pertaining to rural places are seldom reliable. The 1990 census reports that 97% of the land area of the forty-eight contiguous states is rural and about 80% is nonmetropolitan. This vast area provides residence for 22.5% and 24.8% of the population, respectively. Sparsity of population is of value to some people most of the time, and other people part of the time, as well as for certain space-using activities such as farming and forestry. Nevertheless, space equates to distance, and overcoming distance requires a sacrifice of time and other resources (Crosson, Fuguitt, Hart). Farming occupies about one-half the land area of rural America. Farming and agricultural services provide less than 10% of the total employment in nonmetropolitan places. Further, there is a remarkable similarity in the sectoral shares of employment between metropolitan and nonmetropolitan counties (Mills). Thus, there is little factual basis for the common practice of treating agricultural and rural as synonymous. Great interdependence exists between rural and urban systems, rural fundamentalist rhetoric to the contrary (Weber). It is difficult to imagine a single significant rural social problem that can be understood or addressed in isolation from urban or global systems (Jacobs).
TL;DR: A newly developed demand system is used to estimate the response of food and food product demand to per capita expenditure changes in this paper, and the resulting Engel elasticities are then used to project food and product demand in 2020 assuming per capita expenditures and population changes.
Abstract: May 1998
Purdue AGEC Staff Paper #98-5
A newly developed demand system is used to estimate the response of food and food product demand to per capita expenditure changes. The resulting Engel elasticities are then used to project food and food product demand in 2020 assuming per capita expenditure and population changes.
Results suggest that while food expenditure is projected to grow, it accounts for a smaller proportion of total expenditure. Further analysis indicates change in the composition of food demand away from a grain and towards livestock is projected to occur in lower income countries in 2020.
TL;DR: In this article, the authors assess the interaction between climate change and agricultural trade policies and find that, in the presence of current levels of agricultural subsidies, increased price transmission reduces global welfare in the wake of climate change.
Abstract: American Journal of Agricultural Economics, 80(December):1052-1062.
This study assesses the interaction between climate change and agricultural trade policies.
We distinguish between two dimensions of agricultural trade policy: market insulation and
subsidy levels. Building on the previous work of Tsigas, Frisvold and Kuhn (1997) we find that,
in the presence of current levels of agricultural subsidies, increased price transmission --as called for under the Uruguay Round Agreement on Agriculture-- reduces global welfare in the wake of climate change. This is due to the positive correlation between productivity changes and current levels of agricultural support. Increases in subsidized output under climate change tend to
exacerbate inefficiencies in the global agricultural economy in the absence of market insulation.
However, once agricultural subsidies have also been eliminated, price transmission via the global
trading system contributes positively to economic adaptation under climate change.
products. This may partially explain the relatively slow growth of world grain import demand in recent years. In addition, bilateral agreements with East Asia, NAFTA, and the evolution of the CAP, have all had important impacts on the structure of world food and agricultural trade.
The objective of this paper is to assess the relative role of each of the major forces--
consumer demand, factor accumulation, transport costs, and policy change--in driving changes in
the composition of world food trade in 1980-1995. To do so, we employ a modified version of the
Global Trade Analysis Project (GTAP) model of world trade which permits us to isolate the
contribution of each of these related factors to the changing composition of world food trade in a
general equilibrium context.
We evaluate the relative role of each of these factors by simulating the model backwards in
time, from 1995 to 1980 under different assumptions. This general approach, termed “backcasting”
(i.e. backwards forecasting), takes as exogenous the basic drivers of change and attempts to explain the resulting change in food trade composition. The model-produced changes in the composition of agricultural and food trade are compared with historical trade data, to determine the relative importance of each factor on the changing composition of food trade. Given limited space, our focus will be on explaining the changes in the global composition of food and agriculture trade. A natural follow-on effort would target specific markets in more detail.
This type of backcasting approach was first employed by Gehlhar (1997) who sought to
explain the shift in exports of primary commodities to manufactures in East Asia in the 1980's. He calibrated the GTAP model to 1992 data, then implemented shocks to factor endowments and economywide total factor productivity (TFP) in order to force each economy back to its 1982 levels of population, land, labor, human capital, physical capital and technology. By comparing actual and
predicted changes in export shares in this period, he found human capital accumulation played a key role in explaining the change in the aggregate composition of East Asian exports. Gehlhar, Hertel and Martin (1994) built on this work in an effort to predict future changes in the pattern of agricultural trade from 1992-2002. They also emphasized the importance of supply-side determinants of agricultural trade.
In this paper, we go beyond this earlier work in a number of ways. First, we focus on the
composition of agricultural exports, rather than simply looking at the share of agriculture in total trade. Secondly, we incorporate the Cranfield et al. estimates of Rimmer and Powell’s recently developed, implicitly directly additive demand system (nicknamed AIDADS) into the GTAP model.
This permits us to better capture the impact of demand-side changes on the pattern of global tr
TL;DR: It is shown that, for general specifications of altruism, household WTP is less than the sum of household members' individual WTP.
Abstract: The issue of whether willingness to pay (WTP) for the benefits generated by a public good should be elicited on an individual or on a household basis is addressed. Differences between individual and household WTP may arise when members of the household are mutually altruistic. It is shown that, for general specifications of altruism, household WTP is less than the sum of household members' individual WTP. Implications for the choice between household and individual measures of WTP are considered, and issues in the elicitation of household WTP are addressed.