Showing papers in "Applied Economic Perspectives and Policy in 2012"

Index Insurance for Developing Countries

Abstract: Unlike conventional insurance, which indemnifies policyholders for verifiable production losses arising from multiple perils, index insurance indemnifies policyholders based on the observed value of a specified 'index' or some other closely related variable that is highly correlated with losses. Index insurance exhibits lower transaction costs than conventional insurance, potentially making it more affordable to the poor in the developing world. However, it also offers less effective individual risk protection. This article provides a review of recent theoretical and empirical research on index insurance for developing countries and summarizes lessons learned from index insurance projects implemented in the developing world since 2000. Copyright 2012, Oxford University Press.

Agricultural Insurance in Developed Countries: Where Have We Been and Where Are We Going?

Abstract: Agricultural insurance in developed countries originates in named peril products that were originally offered by private companies approximately two hundred years ago, first in Europe and then in the United States. Today, many agricultural insurance products are offered, most of them heavily subsidized by governments. In the context of developed economies, this article examines the evolution of agricultural insurance products, the economics of the demand and supply sides of agricultural insurance markets, and the economic welfare, political economy, and trade relation implications of private and public agricultural insurance in developed countries.

The End of Farm Labor Abundance

Abstract: An analysis of nationally representative panel data from rural Mexico, with observations in years 2002, 2007, and 2010, suggests that the same shift out of farm work that characterized U.S. labor history is well underway in Mexico. Meanwhile, the demand for agricultural labor in Mexico is rising. In the future, U.S. agriculture will compete with Mexican farms for a dwindling supply of farm labor. Since U.S. domestic workers are unwilling to do farm work and the United States can feasibly import farm workers from only a few countries in close geographic proximity, the agricultural industry will eventually need to adjust production to use less labor. The decline in foreign labor supply to farms in the United States ultimately will need to be accompanied by farm labor conservation, switching to less labor intensive crops and technologies, and labor management practices that match fewer workers with more farm jobs. Copyright 2012, Oxford University Press.

Determinants of Producers' Participation in Agricultural Cooperatives: Evidence from Northern China

Abstract: Agricultural producer cooperatives are of great significance to the development of agricultural productivity and can provide improved economic welfare benefits to farmers. However, such organizations have not been well-developed in China. While China's new Cooperatives Law of 2007 has generated interest among scholars, very few empirical analyses have focused on the role of cooperatives in China's agricultural sector. The main objective of this study is to investigate the determinants of farmers' perception and their decision to participate in cooperatives, using a unique dataset from recently collected survey data of farming households in China's Jilin Province. The empirical results from probit and logit regression models suggest that educational attainment, risk comfort level, farm expansion, operational costs, geographic location and crop types are significant factors that influence producers' perception of cooperatives, as well as their participation behavior. Copyright 2012, Oxford University Press.

Russian Agriculture during Transition: Performance, Global Impact, and Outlook

Abstract: In the 2000s, Russia emerged as a major player in world agricultural markets, on both the supply (mainly grain) and demand side. This article examines Russia's agricultural transition experience, which has resulted in a complex system of diverse producers and institutions, as well as uneven performance. Using a model of transition agriculture, the article explores how key reform policies drove systemic change and commodity restructuring, and how the ensuing changes in the production, consumption, and trade of goods have affected world markets. The article also assesses the performance of Russian agriculture during transition, and provides an outlook for the future.

Advances in Chinese Agriculture and its Global Implications

Abstract: In the past thirty years, China has made great strides in terms of boosting food production while simultaneously reducing the number of its rural poor. This success was largely accomplished through agricultural policy and trade reform, food market liberalization, and public investment in agricultural infrastructure and agricultural research. However, there is much more economic development work to be done in rural China, as issues such as an aging agricultural workforce, land-use rights, and water shortages persist. At the same time, increased urbanization and the rising middle class are changing the demand for food in China. This article outlines the issues facing Chinese agriculture and connects those issues to the global marketplace.

Competition in U.S. Farm Product Markets: Do Long-Run Incentives Trump Short-Run Market Power?

Abstract: This article addresses the current status of farm buyer market power. We argue that buyer power concerns are often overstated because traditional models of buyer power are incapable of depicting the economic interactions that are fundamental to modern agricultural markets, where exchange is governed by stable contractual relationships. Exercising short-run oligopsony power is inimical to the long-run interests of buyers in these settings because below-competitive returns will lead to the exodus of resources from input production. Policy proposals grounded in the presumed linkage between concentration, competition, and market power may well be misguided and detrimental to the objectives that proponents seek to advance.

Long-term Care Financing in the United States: Sources and Institutions

Abstract: This paper reviews the financing of long-term services and supports (LTSS) in the United States. I characterize existing payment arrangements as incomplete insurance. The paper organizes existing literature on U.S. financing of LTSS and uses it to analyze the economic, policy and behavioral forces that underpin the observed equilibrium. I assess several sources of market failure and consider policy directions that are viable within the U.S. political environment. Copyright 2012, Oxford University Press.

A Reappraisal of Investing in Commodity Futures Markets

Abstract: Investments into commodity-linked products have grown considerably in recent years Unlike investments in equities, commodity futures markets produce no earnings; the source of returns is thus unclear This paper examines returns to static long-only US commodity futures investments over five decades and finds that returns to individual futures markets are zero, and the returns to futures market portfolios depend critically on portfolio weighting schemes Historical portfolio returns are not statistically different from zero and are driven by price episodes such as that of 1972-1974 In other periods, portfolio returns are zero or negative Overall, the case for long-only investment in commodities may not be as strong as that implied in some studies (eg, Gorton and Rouwenhorst, 2006a) If so, the growth in long-only commodity investments may naturally subside and ease the policy debate regarding speculative position limits

Market Structure, Competition from Assisted Living Facilities, and Quality in the Nursing Home Industry

Abstract: The effort to provide more long-term care in community-based settings has caused an expansion in the supply of assisted living beds, yet little is known about the interrelationship between this expansion and nursing home quality. This paper studies data from the State of Ohio to determine if nursing home market structure and the expansion in the supply of assisted living beds impact the quality of care provided by nursing homes. The findings suggest that nursing home quality can be lower in markets with a greater supply of nursing homes. Further, assisted living facility market structure is found to have a mixed effect on nursing home quality. The results of this paper suggest a need for a more integrated approach to regulating long-term care providers. Copyright 2012, Oxford University Press.

How Do Biofuel Use Mandates Cause Uncertainty? United States Environmental Protection Agency Cellulosic Waiver Options

Abstract: Biofuel policy in the United States sets minimum use mandates for different biofuels, but the cellulosic mandate, introduced in 2010 has been waived and reduced to nearly zero since then. This waiver has shifted the burden of compliance to other biofuels, but other options exist. We examine some alternatives using a structural model of biofuel, agricultural, and mandate markets. Our estimates show that crop price levels, crop and livestock farm income, compliance costs, and greenhouse gas emissions are all sensitive to whether and how the cellulosic mandate is waived. Mandate analysis that does not consider Environmental Protection Agency implementation, or waiver analysis that disregards the hierarchical nature of the mandates could be misleading. Copyright 2012, Oxford University Press.

Emergency Vaccination to Control Foot-and-mouth Disease: Implications of its Inclusion as a U.S. Policy Option

Abstract: Emergency animal vaccination has been used in recent international foot-and-mouth disease outbreaks, but current USDA policy favors emergency vaccination use only if standard culling practices alone may not be enough to control spread of the disease. Using simulation modeling, we examine implications of standard culling plus emergency ring vaccination strategies on animal loss and economic welfare loss compared to a standard culling base. Additionally, breakeven risk aversion coefficient analysis is used to examine emergency vaccination as a risk management strategy. Results indicate that response enhanced with emergency vaccination is inferior to standard culling under short diagnostic delays because it causes, on average, greater animal and national economic welfare losses. We find that emergency vaccination does have merit as a risk management strategy, as it can reduce the likelihood of an 'extreme' outbreak. Copyright 2012, Oxford University Press.

Supplemental Nutrition Assistance Program Dynamics and Employment Transitions: The Role of Employment Instability

Abstract: Employment transitions have been shown to be an important predictor of the decision to either enter or exit the Supplemental Nutrition Assistance Program (SNAP). However, little is known about how the associations between losing a job and entering the program, or between obtaining a job and leaving the program differ by individuals' more long-term employment experiences. This article uses a sample from the Survey of Income and Program Participation, collected from 2001 to 2003, to examine how long-term instability in employment affects the association between employment transitions and the decision to enter and exit SNAP. Empirical models of program entry and exit are estimated for a full sample and for family subgroups of particular interest to program policy-makers. Our results provide evidence that employment changes are more strongly associated with program entry and exit for individuals who are less accustomed to experiencing fluctuations in employment than those who are more accustomed to experiencing these fluctuations. Copyright 2012, Oxford University Press.

Providing Numbers for a Food versus Fuel Debate: An Analysis of a Future Biofuel Production Scenario

Abstract: This study provides a quantitative estimate of grain that would be available for biofuel production under different scenarios of dietary requirements in the world in 2050 based on the projected information available in 2007 on population, productivity increase, dietary requirements, and land use types. Our major findings are as follows: (1) if dietary requirements do not increase by more than 20% from the current level, crop yields from current cropland must increase by more than 57% just to meet dietary demand; (2) the restriction of pastureland for milk and meat production purposes would imply insufficient food production for a moderate diet consumption scenario in 2050; (3) If food demand increases by 20% of the current consumption level, a 60% increase in crop yield and a 16% conversion of pasturelands would meet grain demand and leave surplus grain to supply 23% of liquid fuel demand. We also highlight the potential roles played by biotechnology, research and development fundings, irrigation, and cropping intensity to boost crop production and ultimately make more land available for biofuel production if such an option continues to be considered in future. Copyright 2012, Oxford University Press.

Impact of Participatory Forestry Program on Sustainable Rural Livelihoods: Lessons From an Indian Province

Abstract: This paper examines how rural livelihoods are improved owing to the impact of policy interventions through community-driven forest management in West Bengal, India. As an instance of comparative analysis of a gender-sensitive forestry program, this study employs the 'sustainable rural livelihoods' framework to assess any enhancement of livelihood opportunities across various socioeconomic groups in forest fringe areas. In general, robust livelihoods sustainability is found for a pro-poor section of rural households that participated in the forestry program. Amongst participants, however, especially the feminine units attain more favorable livelihoods outcome. Conversely, the program's eschewed households are behind sustainable livelihoods. It is therefore early need to expand the participatory forestry program for sustaining poor households' livelihood security in forest fringe areas of rural India. Copyright 2012, Oxford University Press.

Demand for Whole‐grain Bread Before and After the Release of Dietary Guidelines

Abstract: The federal government has issued Dietary Guidelines for Americans seven times since 1980, but the 2005 whole-grain recommendation was the first instance in which consumers were given a specific dietary target, that whole grains should be at least half of their grain consumption. Anecdotal evidence pointed to a unique result, an increase in demand for whole-grain foods. Contemporaneous decreases in prices of whole-grain foods, relative to refined-grain foods, however, confound the evidence. We show that for whole-grain bread, there was an increase in retail demand even after accounting for price changes. Separate models for higher- and lower-income consumers show that the demand shift occurred among higher-income consumers, but not for lower-income consumers. Copyright 2012, Oxford University Press.

Does adoption of pharmaceutical innovation respond to changes in the regulatory environment

Abstract: This paper investigates how regulation impinged on the launch strategies of international pharmaceutical corporations for new molecules across the main OECD markets between 1960–2008. Comprehensive IMS data is used to analyze the international diffusion of 845 molecules from 14 different anatomic therapeutic categories using non-parametric survival analysis. The paper focuses on two main regulatory changes that substantially reshaped the barriers to entry: the U.S. Hatch-Waxman Act in 1984, and the establishment of the European Medicines Agency (EMA) in 1995. We find that legal transaction costs have a significant impact on timing of launch. Stringent market authorization requirements for new pharmaceutical products in the United States after 1962 resulted in a significant U.S. drug lag in the introduction of pharmaceutical innovation vis-a-vis Europe from 1960–1984. However, financial incentives stemming from the 1984 Hatch-Waxman Act proved effective in closing this lag. A more streamlined EMA regulatory approval process has reduced barriers to entry in Europe, thereby enabling quicker diffusion of pharmaceutical products, yet a marked pattern of delay in the adoption of innovation is still evident due to local differences in pricing regulations. Any new molecule launch strategically takes place first in higher-priced European Union (EU) markets as a result of the threat of arbitrage and price dependency across EU Member States.

Front-of-Package Nutritional Labels and Consumer Beverage Perceptions

Abstract: The pressure to find solutions for high rates of obesity and overweight in the U.S. population has led industry groups to introduce voluntary front-of-package (FOP) nutritional labeling for beverages. This research examines the impact of these labels on consumers' perceptions of the healthiness of beverages. Though consumers reacted differently depending on the information in the label, in general, the perception of milks and 100% juices decreased, while perception of soft drinks and less than 100% juice drinks increased. If the purpose of FOP labels is to encourage healthier choices, the changes observed appear to be at odds with the goal.

Diffusion of Bt Cotton in India: Impact of Seed Prices and Varietal Approval

Abstract: The Indian government imposed a ceiling on the price of Bt cotton seeds in 2006. This paper aims to analyze the effect of such price intervention on the diffusion of Bt cotton in India. Using three variations of dynamic logistic models, diffusion paths in nine major cotton growing states from 2002 to 2008 are studied. It was found that although seed prices were significant in impacting the diffusion rates, the effect was limited. It was also found that varietal approval is an important factor affecting diffusion rates.

Trade Policy Reform, Productivity Growth and Welfare in South Korean Agriculture

Abstract: This is the author's peer-reviewed final manuscript, as accepted by the publisher. The article is published by Oxford University Press, on behalf of Agricultural and Applied Economics Association. The published article can be found at: http://aepp.oxfordjournals.org/.

Measuring Inefficiency in Long-term Care Commissioning: Evidence from English Local Authorities

Abstract: Using a stochastic frontier approach, this paper explores efficiency in the commissioning of publicly funded social services among 148 English Councils through a six-year panel database (2002-2007), covering institutional and community care. Our estimates provide key policy evidence in a context in which optimization is critical both for social and financial purposes. Results suggest a slight decrease in the average inefficiency score, moving from 1.080 in the first year to 1.076 in the last year. Cost-output elasticity of institutional care is greater than those of community care services. Greater savings are obtained when the market is open to independent providers.

Why Do People Let Their Long-term Care Insurance Lapse? Evidence from the Health and Retirement Study

Abstract: This paper empirically analyzes how often and why individuals drop their long-term care insurance (LTCI) coverage, using data from the 2002-2008 Health and Retirement Study. It finds that over a two-year period 13% of LTCI policies lapse. It also finds that the probability of an LTCI lapse increases with a lack of consumer knowledge about their policy's benefit provisions, with prior encounters with the long-term care system, with less expensive policies, and with less generous policies. These findings raise the possibility that some policyholders may not understand their coverage limitations, and learn about them only after actually using long-term care services. Greater consumer awareness of LTCI policy features and limitations may help reduce lapse rates and increase the stability of the LTCI market. Copyright 2012, Oxford University Press.

Policy Risk in the Canadian Dairy Industry

Abstract: Canadian dairy farmers purchase a marketing quota through the Provincial Marketing Boards to sell milk in Canada. That quota captures rents created by regulations and is subject to policy risk. We define policy risk as the farmers' expectation that quota rents will decline or disappear over time. We calculate the effect of perceived policy risk to determine whether the Uruguay Round Agreement affected the amount of protection given to farmers. Calculated policy risk ranged from 14-29%. Policy risk increased in the years leading up to the Uruguay Round Agreement, but decreased after the WTO was established and remains at a historic low. Copyright 2012, Oxford University Press.

The Impact of Financial Incentives on the Composition of Long-term Care in Norway

Abstract: In Norway, municipalities have economic incentives for choosing residential care in nursing homes for high-income clients and home-based care for low-income clients. Using a three-year panel, 2007-2009, on 427 municipalities we provide an analysis of the effect of the Norwegian long-term care (LTC) financing system on the composition of LTC services at the municipality level. Our main result is that the composition of service is determined by local government revenue and local need for LTC services. We cannot identify an effect of average income among older people in a municipality regarding the balance between home-based care and nursing home care. Hence, the results do not provide evidence of a service distortion.

Reforming Long-term Care Funding Arrangements in England: International Lessons

Abstract: Ever since the failed 1999 Royal Commission, England has been attempting to reform its long-term care funding system. More than a decade later, significant changes to the means tested arrangements are yet to be introduced, whilst the pressure to achieve long-term reform mounts linked to increases in public expenditure and ever growing demand for better services. This paper examines the pros and cons of alternative options for reforming the English long-term care funding arrangements by examining the rationale for and consequences of the recent long-term care developments in Germany, Japan and France. In particular, the paper examines the implications of the reform options adopted in the different countries examined for equity and efficiency in the use of long-term care resources and for the sustainability of the long-term care system as a whole.

A Comparison of Salary Structures Between Economics and Agricultural Economics Departments

Abstract: We examine whether differences exist in the prevailing salary structures for doctorate-granting economics and agricultural economics departments at public, land-grant universities in the United States. Within a sample of 440 economists and 375 agricultural economists, we find that economics departments exhibit greater variation in annual salaries, higher estimated negative returns to seniority, and larger estimated returns to career publishing success than do agricultural economics departments. These difference manifest themselves in a hierarchical salary distribution in which members of elite economics departments earn the highest predicted annual salaries, members of elite agricultural economics and middle-ranked economics departments earn middle predicted annual salaries, and members of middle- and lower-ranked agricultural economics and lower-ranked economics departments earn the lowest predicted annual salaries. In 16 out of 22 universities studied, we predict that economists would face salary declines if they moved across campus (or in some cases down the hall) to their respective agricultural economics departments.

Analyzing Farmer Participation Intentions and County Enrollment Rates for the Average Crop Revenue Election Program

Abstract: The 2008 Farm Bill created the Average Crop Revenue Election (ACRE) program to be a new commodity support program. Using a multinomial logit model to analyze a mail survey administered before the ACRE sign-up deadline, we identify factors driving farmer intentions regarding ACRE participation. Using a Tobit model to analyze actual county-level ACRE enrollment rates, we assess the effect of similar factors on actual farmer decisions. Results suggest that primary crops, risk perceptions, risk aversion, and program complexity were important factors affecting participation. Farmer beliefs and attitudes also played key roles, and were changing during the months before the ACRE deadline. Copyright 2012, Oxford University Press.

Judging Farmers' Willingness to Trade Distance and Taxes for Extension Services

Abstract: Is it necessary for the U.S. Cooperative Extension Service system to maintain an extension office in every county? Using stated choice data from a conjoint analysis experimental design, we examine the tradeoffs that farmers are willing to make when choosing between local offices based on differences in educational programs offered, expertise level of staffing educators, distance to the local office, and the level of local taxation required to support an extension office. Our results show farmers' willingness to travel further and/or pay higher taxes in support of their 'local' extension office depends on access to specialized expertise, crop, economics/finance, and 4-H programs, and shared facilities with USDA agencies. However, farmers may not be willing to pay enough for local offices to actually cover their costs. Copyright 2012, Oxford University Press.

State Trading Enterprises as Non-Tariff Measures: Theory, Evidence and Future Research Directions

Abstract: State trading enterprises (STEs) are widely used among the major agricultural importers and exporters including, inter alia, China, India, Japan, South Korea, Indonesia and Canada, among many others. The concerns with STEs are that, in importing markets, they inhibit market access while, in the exporter context, they provide ‘unfair’ advantages among competing exporters. If these concerns are justified, then STEs can be viewed as non-tariff barriers to achieving undistorted trade and, in principle, their effects can be measured in the form of tariff or export subsidy equivalents. The potential for STEs to distort trade has been recognised in the current OECD MAST initiative. However, the treatment of STEs in this context is inadequate, the characterisation of an STE being limited to its “monopoly status” and thus its classification as anti-competitive. This characterisation is overly-simplistic because it does not fully account for the ways in which STEs may distort trade, if at all. The determinants of this trade distortion turn out to be more complex than the monopoly characterisation, and, as such, this characterisation does not fully capture the heterogeneity of STEs as they exist across countries and commodity sectors. Therefore, STEs in the importing country context are more accurately described by the more neutral term ‘non-tariff measure’. Nevertheless, assessing the trade-distorting effects poses significant conceptual and measurement challenges which we address in this paper. Specifically, we cover four themes in this paper. First, we provide background coverage of STEs in world agricultural trade and the treatment of STEs in the WTO. This treatment is important because the relevant GATT Articles highlight specifically that the key characterisation of STEs which matters is the role of the exclusive rights that apply to them. Second, we review recent theoretical developments in the literature on STEs that help to identify the key determinants ...