Showing papers in "American Journal of Agricultural Economics in 2003"

The Rise of Supermarkets in Africa, Asia, and Latin America

Abstract: Supermarkets are traditionally viewed by development economists, policymakers, and practitioners as the rich world’s place to shop. The three regions discussed here have the great majority of the poor on the planet. But supermarkets are no longer just niche players for rich consumers in the capital cities of the countries in these regions. The rapid rise of supermarkets in these regions in the past 5-10 years has transformed agrifood markets – at different rates and depths across regions and countries. Many of those transformations present great challenges – even exclusion – for small farms, processing and distribution firms, but also potentially great opportunities. Development models, policy and programs need to adapt to this radical change.This brief article describes this transformation of agrifood systems in Africa, Asia (excluding Japan), and Latin America. First, we describe the traditional retail and wholesale system in the midst of which emerged modern food retailing and its procurement system. Second, we discuss the determinants of and patterns in the diffusion of supermarkets in the three regions. Third, we discuss the evolution of procurement systems of those supermarkets, and consequences for agrifood systems. At the end, we hint at emerging implications for farms and firms in the region.

Demand for Beef from Cattle Administered Growth Hormones or Fed Genetically Modified Corn: A Comparison of Consumers in France, Germany, the United Kingdom, and the United States

Abstract: We compare consumer valuations of beef ribeye steaks from cattle produced without growth hormones or genetically modified corn in France, Germany, the United Kingdom, and the United States. Results suggest that French consumers place a higher value on beef from cattle that have not been administered added growth hormones than U.S. consumers; however, valuations of non-hormone-treated beef are statistically indistinguishable across Germany, the United Kingdom, and the United States. Results also suggest that European consumers place a much higher value on beef from cattle that have not been fed genetically modified corn than U.S. consumers. Copyright 2003, Oxford University Press.

Effects of Cheap Talk on Consumer Willingness-to-Pay for Golden Rice

Abstract: A large body of literature suggests willingness-to-pay is overstated in hypothetical valuation questions as compared to when actual payment is required. Recently, "cheap talk" has been proposed to eliminate the potential bias in hypothetical valuation questions. Cheap talk refers to process of explaining hypothetical bias to individuals prior to asking a valuation question. This study explores the effect of cheap talk in a mass mail survey using a conventional value elicitation technique. Results indicate that cheap talk was effective at reducing willingness-to-pay for most survey participants; however, consistent with previous research, cheap talk did not reduce willingness-to-pay for knowledgeable consumers.

An Optimal Control Model of Forest Carbon Sequestration

Abstract: This study develops an optimal control model of carbon sequestration and energy abatement to explore the potential role of forests in greenhouse gas mitigation. The article shows that if carbon accumulates in the atmosphere, the rental price for carbon sequestration should rise over time. From an empirical model, we find that carbon sequestration is costly, but that landowners can sequester substantial amounts of carbon in forests mainly by increasing forestland and lengthening rotations. Forest sequestration is predicted to account for about one-third of total carbon abatement. Tropical forests store over two-thirds of this added carbon.

Getting Institutions “Right” for Whom? Credit Constraints and the Impact of Property Rights on the Quantity and Composition of Investment

Abstract: Property rights reform is typically hypothesized to boost investment through investment demand and credit supply effects. Yet when the credit supply effect is muted, property rights reform would be expected to induce liquidity-constrained farms to reduce investment in movable capital even as they increase investment in attached capital. This expectation is corroborated by econometric analysis of panel data from Paraguay. While all farmers experience a positive investment demand effect, liquidity-constrained producers correspondingly reduce their demand for movable capital. Given an estimated pattern of wealth-biased liquidity constraints, property rights reform will get institutions “right” for only wealthier producers. Copyright 2003, Oxford University Press.

What's Wrong with Our Models of Agricultural Land Values?Agricultural Land Values, Government Payments, and Production (Allen Featherstone, Kansas State University, presiding)

Abstract: Following a large literature on the subject, this paper uses farm level data to investigate the capitalization of various agricultural program benefits into land values. We point out that standard empirical modeling strategies may suffer from substantial shortcomings in that they ignore an important errors-in-variables problem. To the extent that realized policy benefits differ from the expected long-run stream of benefits, results may be misleading. We use a large US farm level data set to demonstrate that the implied effects of benefits on land values may vary substantially across years, crops, policies, and regions. Senior authorship is not assigned. Goodwin is Andersons Professor at the Ohio State University, Mishra is an economist with the Economic Research Service of the USDA, and Ortalo-Magné is Jean Monnet Lecturer at the London School of Economics and visiting associate professor at University of Wisconsin. Direct correspondence to Goodwin at 229 AA, 2120 Fyffe Road, The Ohio State University, Columbus, OH 43210, (614) 688-4138, E-mail: goodwin.112@osu.edu. What’s Wrong With Our Models of Agricultural Land Values?

Genetically Modified Crops, Corporate Pricing Strategies, and Farmers' Adoption: The Case of Bt Cotton in Argentina

Abstract: This article analyzes adoption and impacts of Bt cotton in Argentina against the background of monopoly pricing. Based on survey data, it is shown that the technology significantly reduces insecticide applications and increases yields; however, these advantages are curbed by the high price charged for genetically modified seeds. Using the contingent valuation method, it is shown that farmers’ average willingness to pay is less than half the actual technology price. A lower price would not only increase benefits for growers, but could also multiply company profits, thus, resulting in a Pareto improvement. Implications of the sub-optimal pricing strategy are discussed. Recently, genetically-modified (GM) crops have brought about important changes in the global market for agricultural technologies, especially seeds. Prospects of high economic returns and tightened intellectual property rights (IPRs) have provided new incentives for the private sector to invest in crop improvement and extend its business to nontraditional markets. The increasingly proprietary nature of seed technologies has implications for farmers’ adoption and benefit distribution. Private innovators, endowed with a patent on a technology, will attempt to capture the gains from their innovation through monopoly pricing (Moschini and Lapan). Recent studies have looked into the partitioning of welfare created by GM crops among agricultural producers, consumers, and innovating input firms (e.g., Moschini, Lapan, and Sobolevsky; FalckZepeda, Traxler, and Nelson). In these studies, however, the market price of the technology is

European Consumers' Willingness to Pay for U.S. Beef in Experimental Auction Markets: Reply

Abstract: Consumers’ willingness to pay for Irish, Norwegian, U.S. hormone-free, and U.S. hormone-treated beef was studied in an experimental auction market. We ran four simultaneous second-price auctions to elicit efficiently the complete distribution of willingness to pay differences among our four alternatives. Most participants preferred domestic to imported beef, and half the participants preferred Irish to U.S. hormone-free beef. Hormone-treated beef received the lowest mean bid, but 28% of the participants were indifferent or preferred U.S. hormone-treated to U.S. hormone-free beef. For more than fifteen years the United States and the European Union (EU) have disputed the safety of using growth hormones in the production of beef. In 1989, the EU banned imports of beef from cattle treated with growth-promoting hormones, effectively cutting off North American exports of beef to the EU. 1 Considering the ban to be a protectionist measure, the United States and Canada made a complaint to the World Trade Organization (WTO) in 1996. After a review of the scientific evidence, the WTO supported the North American position and ruled that there was insufficient scientific evidence to support the ban. The EU was given fifteen months to remove the ban unless scientific evidence proving that hormone-treated beef constituted a risk to human health was provided. Although no evidence had been provided by the May 1999 deadline, the ban remained as a provisional measure. The EU argues that there is a

Supermarket Procurement Practices in Developing Countries: Redefining the Roles of the Public and Private Sectors

Abstract: The impact of supermarkets on small producers in developing countries has received much attention in recent years, predominantly focusing on global commodity chains for nontraditional agricultural products to industrialized country markets (see, e.g., Dolan, Humphrey, and Harris-Pascal; Dolan and Humphrey). More recently, attention has been focused on the evolution of supermarkets within developing countries, in particular Latin America (see, e.g., Reardon and Berdegue; Weatherspoon and Reardon). Experience in both contexts suggests that the increasing demand for high-value fresh produce can provide new opportunities for enhanced small producer livelihoods. However, the standards (including food safety and quality requirements) and supply reliability demanded by supermarkets, raise challenges for small producers. Indeed, there is evidence that supermarket buyers in both industrialized and developing countries are increasingly sourcing from large commercial growers. Significant benefits can be derived by both buyers and sellers from long-term partnerships along supply chains, particularly in satisfying nonprice demands (Perosio et al.). Fearne and Hughes suggest that effective communication between and within stakeholders is

Integrating Agri-Environmental Programs into Regional Production Models: An Extension of Positive Mathematical Programming

Abstract: Positive Mathematical Programming (PMP) has become a popular method for regional production models. The standard approach estimates cost (or production) functions for each land-use activity separately from each other. This means that the same crop grown under two technologies is treated as if it were two separate crops, which may lead to unsatisfying results, for example, if agri-environmental programs are modeled. We present an extended version of PMP that leads to more plausible results than the standard version in such cases. The extended method is applicable to other problems where differences in the elasticity of substitution between activities are important.

Child growth, shocks, and food aid in rural Ethiopia

Abstract: This brief summarizes the results of a gender impact evaluation study, entitled Child growth, shocks, and food aid in rural Ethiopia, conducted between 1995 and 1996 in Ethiopia. The study observed the impact of food aid on child growth and shocks in communities on the child level. Food aid has a positive significant impact on the growth in height of children. The total amount of food aid appears on average to be sufficient to offset the negative effects of plot damage on child growth. Given the fact there remains a massive amount of child stunting, there must be large amounts of mis-targeting of aid. Girls seem to be more resilient to shocks than boys.

Determinants of Land Use in Amazônia: A Fine-Scale Spatial Analysis

Abstract: Wetter areas of the Amazon basin exhibit lower rates of agricultural conversion. Previous analyses, using relatively aggregate data on land cover, have been unable to determine the extent to which this reflects limited access versus unfavorable agroclimatic conditions. This article uses census-tract level data for the Brazilian Amazon to relate forest conversion and pasture productivity to precipitation, soil quality, infrastructure and market access, proximity to past conversion, and protection status. The probability that land is used for agriculture or intensively stocked with cattle declines markedly with increasing rainfall, other things equal.

Willingness to Pay for Curbside Recycling with Detection and Mitigation of Hypothetical Bias

Abstract: In this article, we estimate willingness to pay for curbside recycling. Using a unique data set, we also test for and detect significant hypothetical bias using stated- and revealed-preference data. A short-scripted “cheap-talk” statement is used to mitigate the bias and provide more efficient estimates of the welfare impacts of curbside recycling programs. Copyright 2003, Oxford University Press.

Quasi- and Simulated-Likelihood Approaches to Censored Demand Systems: Food Consumption by Food Stamp Recipients in the United States

Abstract: A quasi-maximum-likelihood estimator is proposed and applied to a censored Translog demand system for foods, using a sample of food stamp recipients in the United States. The procedure produces remarkably close parameter and elasticity estimates to those of the simulated-maximum-likelihood procedure. A two-step procedure is also considered but it produces different elasticities. Demands are found to be price elastic for pork and fish but price inelastic for all other food products. Gross complementarity and net substitutability are obvious but these cross-price effects are much less pronounced than own-price and total food expenditure effects. Copyright 2003, Oxford University Press.

Stochastic Technology, Risk Preferences, and Adoption of Site-Specific Technologies

Abstract: A model of farmer decision making is developed to determine the extent to which uncertainties about soil fertility and weather affect the value of site-specific technologies (SSTs) using jointly estimated risk and technology parameters. Uncertainty can lead risk-averse farmers to apply more fertilizers and generate more pollution than in the certainty case. Ignoring uncertainty and risk aversion would overestimate the economic and environmental benefits of SSTs and underestimate the subsidy required to induce adoption. Accounting for uncertainties and risk preferences might explain the low observed adoption rates of SSTs. Improving the accuracy of SSTs would increase the incentives for adoption.

Production Contracts and Productivity in the U.S. Hog Sector

Abstract: This article measures the impact of contracting on partial and total factor productivity and the production technology of U.S. hog operations. A sample selection model accounts for the fact that unobservable variables may be correlated with both the operators’ decision to contract and farm productivity. Results indicate that the use of production contracts is associated with a substantial increase in factor productivity, and represents a technological improvement over independent production. Results also identify determinants of farmers’ decisions to contract and other factors influencing farm The rapid increase in the use of production contracts is a notable feature of the structural change taking place in the US hog industry. Between 1992 and 1998, the portion of feeder pig-to-finish hog operations using production contracts increased from 11% to 34%, while the share of output produced under contract increased from 22% to 63% (McBride, McBride and Key). Production contracts offer several potential advantages over independent production that could explain their growing prevalence. Contracts may serve to lower transaction costs associated with search, negotiation, and transfer; reduce asymmetric information between growers and processors about product quality; improve coordination of product delivery; and lower income risk for growers. In addition, contracting may raise farm productivity by improving the quality of managerial inputs, by speeding the transfer of technical information to growers, or by facilitating growers’ access to credit, thereby permitting the adoption of newer, more efficient technologies. In this article, we focus on identifying and measuring the farm-level productivity gains, if any, that can be attributed to contracting. The recent growth in contracting does not necessarily imply that contracts are associated with higher farm productivity. The increase in the use of contracts may have been propelled

Modeling Conditional Yield Densities

Abstract: Given the increasing interest in agricultural risk, many have sought improved methods to characterize conditional crop-yield densities While most have postulated the Beta as a flexible alternative to the Normal, others have chosen nonparametric methods Unfortunately, yield data tends not to be sufficiently abundant to invalidate many reasonable parametric models This is problematic because conclusions from economic analyses, which require estimated conditional yield densities, tend not to be invariant to the modeling assumption We propose a semiparametric estimator that, because of its theoretical properties and our simulation results, enables one to empirically proceed with a higher degree of confidence Copyright 2003, Oxford University Press

Eating at School: How the National School Lunch Program Affects Children's Diets

Abstract: This article examines the impact of participation in the National School Lunch Program (NSLP) on children's dietary intake at lunchtime and over 24 hours. Using a fixed effects model to control for selection bias, we find that NSLP participation leads to increased 24-hour intake of six vitamins and minerals—calcium, magnesium, phosphorus, zinc, vitamin B12, and riboflavin—as well as dietary fiber. Participation also leads to a trade-off between children's intake of dietary fat and added sugars whereby participants have higher intakes of dietary fat than nonparticipants but lower intakes of added sugars.

The Impacts of Different Farm Programs on Cash Rents

Abstract: County-level annual observations for Iowa from 1996 through 2000 were used to measure the impacts of farm program payments on cash rental rates. The econometric analysis explicitly incorporates spatial autocorrelation. Cash rental rates were found to increase by almost one dollar per acre for each additional dollar per acre paid for market loss assistance and production flexibility contracts, whereas conservation reserve program payments appear to exert no effect on cash rental rates. A counterintuitive finding that warrants further examination is the small but negative impact of deficiency payments on cash rental rates.

An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products

Abstract: This article explores the issue of price and expenditure endogeneity in empirical demand analysis. The analysis focuses on the U.S. carbonated soft drink market. We test the null hypothesis that price and expenditures are exogenous in the demand for carbonated soft drinks. Using an almost ideal demand system (AIDS) specification, we strongly reject exogeneity for both prices and expenditures. We find that accounting for price/expenditures endogeneity significantly impacts demand elasticity estimates. We also evaluate the implications of endogeneity issues for testing weak separability. Over the last few decades, strong linkages between economic theory and econometric methods have stimulated much empirical analysis of consumer behavior (e.g., Deaton and Muellbauer 1980b). The basic approach involves estimating Marshallian demand functions, expressing quantities consumed as functions of prices and household expenditures. The usual practice is to treat prices and expenditure as exogenous variables. In this article, we question the validity of these exogeneity assumptions, especially when focusing on the demand for differentiated products. 1 This is particularly important to the extent that food consumption typically involves differentiated products in market economies. We also examine the interactions between endogeneity of prices/expenditure in demand systems and the testing for weak separability of consumer preferences.

The Incidence of Government Program Payments on Agricultural Land Rents: The Challenges of Identification

Abstract: Economic reasoning and some empirical evidence suggest that government payments increase rents on agricultural lands to which the payments are attached (Barnard et al., Floyd, Gardner, Kuchler and Tegene). The degree to which this occurs—the incidence of current expected government payments on current rent—is relevant for policy in two ways. First, it provides information about the distribution of payment benefits vis-a-vis landowners and farmers. For example, if payment benefits are intended for farmers rather than landowners, and the incidence is high, a share of the benefits may miss their target.1 Because about 60% of U.S. farmland is owned by nonoperators, there is a real potential for this kind of misallocation (Hopkins, Morehart, and Bohman). Second, the level of incidence may reflect the degree to which government programs that give rise to these payments alter production. A high incidence may reflect a low supply response to a government program, because a small share of the payments is dissipated via lower output prices (due to greater quantities supplied) and higher prices for input factors besides land (due to greater quantities demanded). A low incidence may reflect a large supply response and a greater appropriation of payment benefits to commodity consumers and suppliers of other input factors, such as machinery and human capital. Thus, reliable

Protectionism, Trade, and Measures of Damage from Exotic Species Introductions

Abstract: Unintentional introductions of nonindigenous plants, animals, and microbes cause significant ecological and agricultural crop damage worldwide. Trade in both manufactured and agricultural goods is a primary vector for such introductions. Fusing simple models of trade and biological introductions, we explore the links between trade, protectionism, and damage arising from exotic species introductions. We show that it is possible for freer trade to reduce damage arising from exotic species invasions. We also show how current measures of damage—heavily weighted toward agricultural damage—serve as misleading indicators of how restrictions to trade affect total losses arising from exotic species

Creating Incentives for the Adoption of Sustainable Agricultural Practices in Developing Countries: The Role of Soil Carbon Sequestration

Abstract: Sustainable agricultural development is widely acknowledged as a critical component in a strategy to combat both poverty and environmental degradation. Yet, sustainable agricultural development remains an elusive goal, particularly in many of the poorest regions of the world. Soil degradation continues to be a key factor in unsustainable production systems, despite decades of research on soil conservation and other sustainable practices (Hudson; Scherr; Barrett, Place, and Aboud; Sanchez). Various studies stress the role played by resource-poor farmers in human-induced natural resource degradation (Bruntland Commission, Reardon and Vosti, Barbier). The prevailing economic explanation for the continuing trend toward resource degradation in many parts of the world is that economic incentives often encourage degradation and discourage conservation. These incentive problems have been attributed to poor farmers’ high discount rates, lack of capital markets, high transport costs and other market imperfections, adverse government policies, insecure property rights, and limited availability of fodder for grazing or fuel for cooking and heating (e.g., Lutz, Pagiola, and Reiche; Heath and Binswanger). From this perspective, the challenge facing researchers and policy analysts is to understand the factors and processes causing the use

Fertilizer Use, Risk, and Off-Farm Labor Markets in the Semi-Arid Tropics of India

Abstract: A two-period model is developed in which a risk-averse farmer uses off-farm labor to smooth consumption, leading to greater use of fertilizer. Fertilizer demand is shown to increase with the depth of the off-farm labor market. Controlling for exogenous weather risk, farmers use more fertilizer the lower the unemployment rate and the higher the share of nonagricultural work in total off-farm labor. The results suggest that off-farm labor markets and own-farm production may be complementary in risky production environments, so that policies which promote the depth of the off-farm labor market in low-income areas may also bolster farm productivity. Copyright 2003, Oxford University Press.

Combining Revealed and Stated Preferences: Consistency Tests and Their Interpretations

Abstract: This article models the recreation demand for Iowa wetlands, combining survey data on both actual usage patterns (i.e., revealed preferences (RPs)) and anticipated changes to those patterns under hypothetical increases in trip costs (i.e., stated preferences (SPs)). We formulate and test specific hypotheses concerning potential sources of bias in each approach and discuss what can be learned about the validity of the models from such tests.

Are Crop Yields Normally Distributed? A Reexamination

Abstract: This article demonstrates that normality test procedures that include individual detrending of short-term panel data can severely reduce the power of normality tests and strongly bias normality tests in a Type II direction. An alternative error component implicit detrending procedure is suggested that demonstrates higher power for the distributions examined. Both procedures are applied to a large data set with normality of yield residuals being rejected. Assuming normality is shown to reduce potential premium rates for a large number of producers in an existing crop insurance product.

A Joint Framework for Analysis of Agri-Environmental Payment Programs

Abstract: This article presents an approach for simultaneously estimating farmers’ decisions to accept incentive payments in return for adopting a bundle of environmentally benign best management practices. Using the results of a multinomial probit analysis of surveys of over 1,000 farmers facing five adoption decisions in a voluntary program, we show how the farmers’ perceptions of the desirability of various bundles change with the offer amounts and with which practices are offered in the bundle. We also demonstrate an estimator for the mean minimum willingness to accept for the adoption of a practice conditional on the cost share offers for other practices. Agri-environmental payment programs play an important part in improving the environmental performance of agriculture (Claassen and Horan, Batie, Lynch and Smith, Smith; Feather and Cooper, Claassen et al.). Federallevel interest in developing these programs is currently strong. For example, the 2002 Farm Act calls for a five fold increase in funding for the USDA’s Environmental Quality Incentives Program (EQIP). This article focuses on voluntary programs designed along the lines of the EQIP, which provides incentive payments to encourage producers to adopt environmentally benign land management practices such as nutrient management, manure management, and integrated pest management. For policy-making purposes, it would be useful to know the sensitivity of the producer’s decision to enroll in response to a schedule of potential incentive payments and to which practices are bundled together. Such information can be used to assess the costs of encouraging farmers to try various environmentally benign management practices (commonly known as best management practices, or BMPs). EQIP offers the farmer a suite of BMPs to choose from. Existing published research (Cooper and Keim) modeled the probability of farmer adoption of BMPs as a function of the incentive payment, with each practice be

Cost-Effective Targeting of Land Retirement to Improve Water Quality with Endogenous Sediment Deposition Coefficients

Abstract: An integrated framework that combines spatial and biophysical attributes of land with a hydrological model and an economic model is developed to identify cropland for enrollment in the Conservation Reserve Enhancement Program. Sediment deposition coefficients are determined endogenously depending on the land-use decisions on other land parcels. Application of this framework to a watershed in Illinois demonstrates that highly sloping land adjacent to water bodies should be selected for retirement. A marginal value rental payment scheme can achieve program goals of 20% sediment abatement at 39% lower cost than a productivity-based rental scheme.