Showing papers in "American Journal of Agricultural Economics in 1999"

Two-Step Estimation of a Censored System of Equations

Abstract: A consistent two-step estimation procedure is proposed for a system of equations with limited dependent variables. Monte Carlo simulation results suggest the procedure outperforms an existing two-step method.

Econometric Estimation of Technical and Environmental Efficiency: An Application to Dutch Dairy Farms

Abstract: In this article we estimate the technical and environmental efficiency of a panel of Dutch dairy farms. Nitrogen surplus, arising from the application of excessive amounts of manure and chemical fertilizer, is treated as an environmentally detrimental input. A stochastic translog production frontier is specified to estimate the output-oriented technical efficiency. Environmental efficiency is estimated as the input-oriented technical efficiency of a single input, the nitrogen surplus of each farm. The mean output-oriented technical efficiency is rather high, 0.894, but the mean input-oriented environmental efficiency is only 0.441. Intensive dairy farms are both technically and environmentally more efficient than extensive farms.

Haddad, Lawrence, John Hoddinott, and Harold Alderman, eds. Intrahousehold Resource Allocation in Developing Countries: Models, Methods, and Policy. Baltimore MD: Johns Hopkins University Press, 1997, 384 pp., $55.00

Abstract: In this volume economists, demographers, sociologists and anthropologists collaborate in the study of how resources are allocated within households in developing countries and why it matters from a policy perspective. Surveying a broad range of theory and evidence, the contributors examine the many social and cultural factors that influence decisions about the family and household level about the allocation of time, income, assets and other resources. Ths contributors show that a more complete understanding of intrahousehold behaviour can increase the likelihood that policies will reach the people they are intended to affect.

Product Aggregation, Market Integration, and Relationships between Prices: An Application to World Salmon Markets

Abstract: Relationships between prices of goods offer motives of interest in at least two areas: market integration and product aggregation. There is a close relationship between market integration and aggregation, which may increase the usefulness of market integration studies. In this article, these relationships are developed and illustrated by an application to the world salmon market. It is shown that the Law of One Price holds for an international market with five salmon species. This result has significant implications for the world salmon market regarding both product aggregation in demand analyses and international trade policy.

Assessing Consumer Preferences for Ecolabeled Seafood: The Influence of Species, Certifier, and Household Attributes

Abstract: stocks, given that command-and-control regulations applied alone, without market-based incentives, are notorious for their failures (Hannesson). Specifically, companies selling products from accredited fisheries will be able to purchase the right to place an ecolabel on their products, informing consumers that their product was harvested from a sustainable res urce. There appears to be significant support for the initiative. Unilever has pledged to buy and sell only certified fish by 2005. Major supermarket chains, such as Sainsbury's in the United Kingdom and Shaws in the United States, have also signed on as partners in the initiative (www.msc.org). The emergence of the initiative to provide certification of sustainable fisheries leads one

Farm Growth and Survival: Econometric Evidence for Individual Farms in Upper Austria

Abstract: This article investigates survival and growth of more than 50,000 Upper Austrian farm households within a maximum likelihood sample selection framework. The results suggest that age, schooling and sex of the farm operator, size of the farm family, and off-farm employment status, as well as initial farm size, significantly influence farm growth and survival. The present study provides support for the notion of a “disappearing middle” in the size distribution. The process of polarization is closely related to the off-farm employment status of farms. Correcting for sample-attrition bias is important when analyzing the performance of part-time farms.

Adverse Selection in Crop Insurance: Actuarial and Asymmetric Information Incentives

Abstract: Adverse selection is often blamed for crop insurance indemnities exceeding premiums plus subsidies. However, nationwide empirical evidence has been lacking or based on inadequate county-level data. This article uses nationwide farm-level data on corn and soybeans to decompose incentives for participation in U.S, multiple peril crop insurance into a risk-aversion incentive (the conventional justification for insurance), an actuarial or subsidy incentive (reflecting government subsidization), and an asymmetric information incentive (which reflects farmers' information advantage). Results show that the risk-aversion incentive is small. Farmers participate in crop insurance primarily to receive the subsidy or because of adverse selection possibilities.

Measuring Consumer Demand for Ecolabeled Apples

Abstract: gap. This article presents results of a study of consumer demand for ecolabeled apples. Because ecolabels are new, it examines consumer intentions to purchase an ecolabeled apple for the first time. It estimates how many consumers might try ecolabeled apples and examines how their decisions are affected by prices, the comprehensiveness of the environmental claims in the label, and the extent of proof given to support the claims. The role of concerns about the environment and food safety is also examined. Conceptual Framework

Are Crop Yields Normally Distributed

Abstract: The evidence for nonnormality of crop yields is reassessed. Three methodological problems are identified in typical yield distribution analyses: (i) misspecification of the nonrandom components of yield distributions, (ii) missreporting of statistical significance, and (iii) use of aggregate timeseries (ATS) data to represent farm-level yield distributions. One or more of these problems infect virtually all evidence against normality to date. The positive contribution of the article is a set of principles that must be followed in any valid investigation of yield normality.

Forest Management, Conservation, and Global Timber Markets

Abstract: This article develops a global timber market model which captures how timber supply reacts to future predicted increases in the demand for timber. Higher future demand is expected to increase prices, increase investments in regeneration, increase establishment of plantations, and expand output. Dynamic market responses imply a greater reliance on plantations in productive regions, allowing large areas of natural forest in low-valued regions to remain largely intact. Sensitivity analysis suggests that price, harvest, and management are most sensitive to the rate of demand increase, the interest rate, the cost of plantations, and access costs of natural forests. Two forest conservation strategies are examined which predict the system-wide implications of forest conservation in Europe and North America. The policies indicate that whereas set asides can induce net conservation, harvests increase elsewhere, particularly in natural forests.

Structural Changes in the Agricultural Industries: How Do We Measure, Analyze and Understand Them?

Abstract: The U.S. food production and distribution industry is in the midst of major structural change-changes in product characteristics, in worldwide production and consumption, in technology, in size of operation, and in geographic location. And the pace of change seems to be increasing. Production is changing from an industry dominated by familybased, small-scale, relatively independent firms to one of larger firms that are more tightly aligned across the production and distribution value chain. Food retailing is increasingly more customer responsive, more service focused, and more global in ownership. And the input supply and product processing sectors are becoming more consolidated, more concentrated, and more integrated. What are the important dimensions of these changes, and what critical managerial and public policy issues do they raise? What are the motivations behind the decisions of eco-

An Econometric Analysis of the Costs of Sequestering Carbon in Forests

Abstract: The Kyoto Protocol and the U.S. Climate Change Plan recognize afforestation as a potential means of reducing atmospheric CO 2 concentrations. To examine the cost-effectiveness of afforestation, we use econometric land use models to estimate the marginal costs of carbon sequestration in Maine, South Carolina, and Wisconsin. Our findings include the following: (a) earlier studies of afforestation programs tend to underestimate carbon sequestration costs, (b) afforestation still appears to be a relatively low-cost approach to reducing CO 2 concentrations, (c) Wisconsin offers the lowest-cost opportunties for carbon sequestration, and (d) projected population changes have the largest effect on costs in South Carolina.

Are Eco-Labels Valuable? Evidence From the Apparel Industry

Abstract: Using apparel catalog data from the United States, we estimate hedonic price functions to identify market valuation of environmental attributes of apparel goods. We identify a significant and robust premium for the organic fibers embodied in the apparel goods. We also find a discount for the “no-dye” label. We do not, however, find any evidence of a premium for environment-friendly dyes. We further investigate the pricing behavior of apparel suppliers for potential heterogeneous pricing of the organic-fiber attribute and find no evidence of different premia across firms.

Price Transmission and Asymmetric Adjustment in the U.S. Beef Sector

Abstract: The U.S. livestock sector has experienced numerous structural changes in recent years. For example, the meatpacking industry has experienced many mergers and acquisitions leading to significant increases in industry concentration. In particular, the four-firm concentration ratio for steer and heifer slaughter, a frequently cited statistic and an important indicator of industry concentration, increased from 35.7% in 1980 to 79.8% in 1997 (USDA). There have also been significant regional shifts in livestock production and changes in marketing practices, with decreased use of public markets in many areas. For some products, traditional auction markets have been largely replaced by contract production and sales. Cattle inventories have also trended downward over the last two decades. This has been accompanied by decreases in the number of producers and, in some cases, with significant increases in the scale of operations. The vertical transmission of shocks among various levels of the market is an important characteristic describing the overall operation of the market. Of course, price is the primary mechanism by which various levels of the market are linked. The extent of adjustment and speed with which shocks are transmitted among producer, wholesale, and retail market prices is an important factor reflecting the actions of market participants at alternative market levels. The nature, speed, and extent of adjustments to market shocks may also have important implications for marketing margins, spreads, and mark-up pricing practices. An extensive literature has examined mar-

Determinants of Nonfarm Earnings of Farm-Based Husbands and Wives in Northern Ghana

Abstract: The nonfarm work participation decisions of married men and women in rural Northern Ghana were jointly and separately estimated for married couples through a bivariate probit, using recent survey data. Selectivity bias was corrected for in estimating wage offer and labor supply equations, using Heckman's procedure. Education, experience, infrastructure, distance to the capital, and population density, as well as interactions between education and infrastructure and between education and distance to the city, were found to be significantly related to the probability of nonfarm labor market participation, wages, and the amount of nonfarm labor performed, with significant differences by gender.

Crop Insurance, Acreage Decisions, and Nonpoint-Source Pollution

Abstract: The redirection of farm policy in the 1996 farm bill has generated much interest in seeking environmentally friendly and economically viable ways to protect farm income. Agricultural insurance has been suggested as such an instrument. This article estimates the effect of crop insurance on crop mix and the resulting change in chemical use in the Central Nebraska Basin. Providing corn insurance will shift land from hay and pasture to corn, which will increase chemical use at the extensive margin. This extensive-margin effect dominates the effect of crop insurance on the application rate, leading to an increase in total chemical use.

Price Information and Bidding Behavior in Repeated Second-Price Auctions

Abstract: Examining panel data on bidding behavior in over forty second-price auction markets with repeated trials, we observe that (i) posted prices influence the behavior of the median naive bidder; (ii) posted prices do not affect the behavior of the median experienced bidder or the bidder for familiar goods; and (iii) anticipated strategic behavior wanes after two trials. The results suggest that while affiliation might exist in auctions for new goods, the repeated trial design with nonprice information removes the correlation of values and provides the experience that bidders need to understand the market mechanism.

Asymmetry and Rigidity in Farm-Retail Price Transmission

Abstract: This article demonstrates how retail-price transmission asymmetry can arise from intertemporal optimizing behavior among spatially competitive retailers facing concave spatial demand and shows that vigorous competition among retailers may not necessarily result in the larger retail-price declines farmers expect during periods of declining farm prices. It also shows that, when this particular class of retailers incurs repricing costs, retail prices can be rigid over a range of upward and downward movements in the farm price. This suggests that the rigidity of retail prices, during periods of declining farm prices, could be due to repricing costs. It also suggests that the appropriate econometric model of price-transmission is the model of friction, where Tobit analysis is the proper method of estimation rather than nonreversible functions.

Mother's Nutrition Knowledge and Children's Dietary Intakes

Abstract: This article uses US food consumption data to examine the effect of maternal nutrition knowledge on the dietary intakes of children between two and seventeen years of age Results show that maternal knowledge influences children's diets and that such influence decreases as children grow older Nutrition knowledge acts as a pathway through which maternal education influences children's diets This finding supports the hypothesis that education affects health-related choices by raising the allocative efficiency of health input use The results suggest that nutrition education may be more effective if targeted both toward mothers with young children and directly toward school-age children

Observed choices for food safety in retail, survey, and auction markets

Abstract: Experimental markets, run in a lab environment, allow researchers to collect detailed information about participants, to introduce information shocks, and to observe changes in bidding behavior.' It is usually possible to require exchange of real money for real goods. Participants still know that they are being monitored, however, and the range of alternative purchases is usually much more limited than in a retail setting. The chance exists that the classic Hawthorne effect is present-asking people to bid for new products makes them feel useful, so they inflate bids to please the monitor by matching his perceived expectations of good bidding behavior.2 Market surveys typically involve hypothetical decisions, and no guarantee exists that the responses to these hypothetical questions are the same as those that would occur under

Modeling Land Use Decisions with Aggregate Data

Abstract: In this article, we develop land use models to study the impact of changes in decision variables on soil erosion or other environmental outcomes. From an underlying behavioral model, we use maximum entropy to recover a parametric model of county-level land use shares as a function of decision variables such as output prices, input costs, and land quality. The statistical model may be extended to estimate subcounty land use shares and to incorporate data from federal land use surveys. We use the procedure to analyze the impact of changes in livestock inventories on soil erosion rates in three Iowa counties.

Optimum Area Yield Crop Insurance

Abstract: Cet article determine le contrat optimal d'assurance dont l'indemnite depend du rendement agrege sur recoltes d'un bassin de production. Le schema optimal d'assurance est base sur le coefficient individuel de regression qui mesure la sensibilite du rendement agrege a des variations du rendement agrege. Une indemnite est versee lorsque le rendement agrege est inferieur (superieur) a un rendement critique si le coefficient de regression est positif (negatif). Le contrat optimal contient une franchise evanescente si le coefficient de regression est superieur a l'unite.

The New Economics of Agriculture

Abstract: Agriculture in the twentieth century was characterized first and foremost by technological innovation that began in the industrialized world and spread to the developing countries as the Green Revolution. This revolution in biological, chemical, and mechanical technology made it possible for agricultural production to grow faster than the demand for food despite a rapidly growing world population. The result was a decline in real agricultural commodity prices throughout this era-a trend that is expected by many researchers to continue at least into the early part of the twenty-first century (Antle et al., Johnson 1998, Rosegrant and Ringer). At the same time, virtually all governments intervened in their agricultural sectors through a wide array of policies, resulting in a pattern of net taxation of agriculture in low-income countries and subsidization of agriculture in high-income countries. This set of events, and the agricultural economics literature that was generated to explain them, is what I will refer to here as the economics of agriculture in the twentieth century. A stylized demand-andsupply model of an agricultural market can be used to represent these relationships, with output prices P, income I, population N, factor prices W, capital K, technology T, and government policy G:

Estimating the Demand for Protecting Freshwater Lakes from Eutrophication

Abstract: In any discussion of the valuation of public goods, particularly environmental amenities, contingent valuation, travel cost, and hedonics are commonly cited as methods for estimating Hicksian or Marshallian welfare (Freeman). While contingent valuation and travel cost are widely employed, we know of very few applications where hedonic demand functions have been estimated. Palmquist (1984) and Parsons estimated second-stage hedonic demands for characteristics of housing units. Both used the approach of estimating separate hedonic price functions for different real-estate markets to identify demand parameters for housing characteristics.' The research reported here is the first to use separate real-estate markets to identify demand parameters for an environmental amenity. The specific application is water clarity in selected lakes in Maine. Reduced water

Risk Aversion and Yield Uncertainty in Duality Models of Production: A Mean-Variance Approach

Abstract: A duality model of production is developed that endogenizes stochastic output decisions under risk aversion. The model incorporates both yield and price uncertainty and nonlinear mean-variance risk preferences. This permits modeling of the firm's expected output supply and input demand decisions under risk and also, in principle, the firm's output variance decisions. The duality model is tractable for empirical research.

Patterns of State Productivity Growth in the U.S. Farm Sector: Linking State and Aggregate Models

Abstract: This article focuses on agricultural productivity growth at both sector and state levels. It does so in a way that preserves the economic integrity of national and state production accounts. A model accounting for interstate transactions in farm goods links sectorwide and state-specific measures of total factor productivity growth. An interesting conclusion is that the smooth, persistently positive trend typically observed for farm sector productivity growth masks considerable variation across states and regions. The results also indicate that farm sector productivity growth is wholly a function of productivity trends in the individual states. Interstate shifts in production activity and resource reallocations have had little impact.

Economic Feasibility of Variable-Rate Technology for Nitrogen on Corn

Abstract: The economic feasibility of three different fertilizer management strategies (constant rate, three-rate and multiple-rate technology) in the application of nitrogen fertilizer to corn are compared under different probability distributions for field fertility. A constant rate was more profitable than either variable-rate technology system for homogeneous fields with low fertility. The application area at which the relative profitability between systems changed was largely determined by the characteristics of the fertility distribution rather than by assumptions regarding costs. Variable-rate technology improves groundwater quality in low-fertility fields by reducing total fertilizer applied and in high-fertility fields by increasing corn yield.

The Effect of Income and Food Programs on Dietary Quality: A Seemingly Unrelated Regression Analysis with Error Components

Abstract: This article employs new Food Guide Pyramid servings data to measure how food intake is affected by income and two food programs. The analysis uses a maximum likelihood estimator that combines the seemingly unrelated regression and one-way error component models, to account for two types of intrahousehold correlations. Participation in the Food Stamp Program is associated with higher intake of meats, added sugars, and total fats. Participation in the Special Supplemental Nutrition Program for Women, Infants, and Children is associated with lower intake of added sugars.

The Importance of Learning in the Adoption of High-Yielding Variety Seeds

Abstract: To date, due to the lack of panel data, most micro-level empirical studies of technology adoption have used cross-sectional data. These studies cannot examine the dynamic processes of adoption such as learning. This article uses panel data to study the adoption of a new high-yielding variety seed. First, it establishes that learning is an important variable in the adoption process. Second, it establishes that cross-sectional estimates of a dynamic process are biased but that the extent of this bias may be small. Third, it illustrates the econometric methods needed to estimate a dynamic model when controlling for unobserved household heterogeneity.

Producer Price Risk and Quality Measurement

Abstract: Risk-averse farmers in the produce industry grow a product whose market price is often quite unpredictable. Shippers or other intermediaries shield the farmer from much of this price risk; however, actual contracts between growers and shippers vary considerably across commodities in the residual price risk growers face. We hypothesize that imperfect quality measurement results in a moral hazard problem, and that price provides additional information regarding quality. As a consequence, an efficient contract does not shield growers from all idiosyncratic price risk. We examine this hypothesis for the case of fresh-market tomatoes.