New Economics Papers
on Agricultural Economics
Issue of 2004‒12‒12
nineteen papers chosen by

  1. MARKET ASSISTED LAND REFORM IN NE BRAZIL: A STOCHASTIC FRONTIER PRODUCTION EFFICIENCY EVALUATION By Hildo Meirelles de Souza Filho; Miguel Rocha de Sousa; Antônio Márcio Buainain; José Maria da Silveira; Marcelo Marques Magalhães
  3. Price Incentives, Nonprice factors, and Crop Supply Response:The Indian Cash Crops By SUNIL KANWAR
  4. Relative Profitability, Supply Shifters and Dynamic Output Response:The Indian Foodgrains By SUNIL KANWAR
  5. Equilibrium Commodity Prices with Irreversible Investment and Non-Linear Technologies, By Jaime Casassus; Pierre Collin-Dufresne; Bryan R. Routledge
  6. Production Performance in Russian Regions: Farm Level Analysis By Irina Bezlepkina
  7. Effects of Human Capital on Farm and Non-Farm Productivity and Occupational Stratification in Rural Pakistan By Takashi Kurosaki; Humayun Khan
  8. The market for cocoa powder By Henk. L.M. Kox
  9. Information and the Risk-Averse Firm By Robert G. Chambers; John Quiggin
  10. Separability of stochastic production decisions from producer risk preferences in the presence of financial markets By Robert G. Chambers; John Quiggin
  11. Increasing Uncertainty: A Definition By Simon Grant; John Quiggin
  12. Comparative statics for state-contingent technologies By John Quiggin; Robert G. Chambers
  13. Supermodularity and the comparative statics of risk By John Quiggin; Robert G. Chambers
  14. Dual structures for the sole-proprietorship firm By Robert G. Chambers; John Quiggin
  15. Environmental Labelling and Consumer's Choice - An Empirical Analysis of the Effect of the Nordic Swan By Thomas Bue Bjorner; Lars Garn Hansen; Clifford S. Russell
  16. Managing natural resources in the Pacific Islands By Satish Chand
  17. Productivity in the Australian Dairy Industry By Tom Kompas; Tuong Nhu Che
  18. Production and Technical Efficiency on Australian Dairy Farms By Tom Kompas; Tuong Nhu Che
  19. Market reform, productivity and efficiency in Vietnamese rice production By Tom Kompas

  1. By: Hildo Meirelles de Souza Filho; Miguel Rocha de Sousa; Antônio Márcio Buainain; José Maria da Silveira; Marcelo Marques Magalhães
    Abstract: We evaluate the "Cédula da Terra" Pilot Project, a land reform project whose conception, mechanisms and operational structure is different from traditional agrarian reform based on expropriation. The land distributed by the project, is first acquired by the agricultural producers associations, and a given set of incentives is established to obtain a better efficiency use of resources. The main objective of this article is to characterize the sources of technical and allocative inefficiency from a cross section of 309 beneficiaries from five states in NE Brazil. We estimated a potential production frontier following the methodology of BATTESE and COELLI (1995), using the software FRONTIER 4.1. (Tim COELLI, 1996). The main conclusion is that technical assistance, human capital (years of schooling) and better access to credit reduce inefficiency, or thus increase technical and allocative efficiency of the beneficiaries.
    JEL: Q15
    Date: 2004
  2. By: Mario A. Margarido; Frederico A. Turolla; Carlos R. F. Bueno
    Abstract: This paper investigates the price transmission in the world market for soybeans using time series econometrics models. The theoretical model developed by Mundlack and Larson (1992) is based on the Law of the One Price, which assumes price equalization across all local markets in the long run and allows for deviations in the short run. The international market was characterized by three relevant soybean prices: Rotterdam Port, Argentina and the United States. The paper estimates the elasticity of transmission of these prices into soybean prices in Brazil. There were carried causality and cointegration tests in order to identify whether there is significant long-term relationship among these variables. There was also calculated the impulse-response function and forecast error variance decomposition to analyze the transmission of variations in the international prices over Brazilian prices. An exogeneity test was also carried out so as to check whether the variables respond to short term deviations from equilibrium values. Results validated the Law of the One Price in the long run. In line with many studies, this paper showed that Brazil and Argentina can be seen as price takers as long as the speed of their adjustment to shocks is faster than in the United States, the latter being a price maker. An interesting conclusion was reached when the pattern of the impulse response functions was compared to the timing of crop and trade in Brazil, Argentina and the United States. These seasonal differences may help explaining the pattern of the response of Brazilian prices to shocks in the international market, especially that the response from shocks in the United States is opposite to the response from shocks in Argentina because harvest in the two hemispheres occurs in different periods. In addition, the one-month lag between Brazilian and Argentine harvests may contribute to explain a turning point in the impulse-response function that occurs one month after the shock.
    JEL: Q17 C32
    Date: 2004
  3. By: SUNIL KANWAR (Delhi School of Economics)
    Abstract: Agriculture as a source of growth was sorely neglected in the early development strategies of the currently developing countries. Realisation of this shortcoming prompted public policy in these countries to encourage agriculture by various means. The success of these policies depends, however, on how farmers respond to the incentives provided. Using panel data pertaining to Indian agriculture for the period 1967-68/1999-00, covering 7 major 'annual' cash crops cultivated across 16 major states, we provide estimates of area, yield and output elasticities w.r.t price and nonprice variables. Our results suggest that the preferred policy ought to be to enhance irrigation and encourage the use of fertiliser and HYVs, if long-run agricultural growth is to be achieved.
    Keywords: Incentives, supply response, deprivation
    JEL: O13 Q11
    Date: 2004–11
  4. By: SUNIL KANWAR (Delhi School of Economics)
    Abstract: The realisation that the wage-goods constraint, if binding, could stall the growth process of a developing country, prompted policy makers to encourage agriculture by various means. The success of public policy depends, however, on how strongly farmers respond to the incentives provided. Using a large panel dataset pertaining to Indian agriculture - spanning the period 1967-68/1999-00, and covering the 6 important food crops cultivated across 16 major states - we provide estimates of area, yield and output elasticities w.r.t price and nonprice factors. We find consistent evidence, that the supply response of food crops is influenced by rainfall, input availability (specifically irrigation, fertilizer and improved seeds), and relative profits, in that order of importance. Our results prompt us to conclude, that all things considered, the preferred policy should be to encourage irrigation, fertilizer use and the use of modern seeds, rather than raise output support/procurement prices period after period.
    Keywords: wage-goods, price incentives, supply shifters
    JEL: O13
    Date: 2004–11
  5. By: Jaime Casassus; Pierre Collin-Dufresne; Bryan R. Routledge
    Abstract: We model the properties of equilibrium spot and futures oil prices in a general equilibrium production economy with two goods. In our model production of the consumption good requires two inputs: the consumption good and a Oil. Oil is produced by wells whose flow rate is costly to adjust. Investment in new Oil wells is costly and irreversible. As a result in equilibrium, investment in Oil wells is infrequent and lumpy. Equilibrium spot price behavior is determined as the shadow value of oil. The resulting equilibrium oil price exhibits mean-reversion and heteroscedasticity. Further, even though the state of the economy is fully described by a one-factor Markov process, the spot oil price is not Markov (in itself). Rather it is best described as a regime-switching process, the regime being an investment `proximity' indicator. Further, our model captures many of the stylized facts of oil futures prices. The futures curve exhibits backwardation as a result of a convenience yield, which arises endogenously due to the productive value of oil as an input for production. This convenience yield is decreasing in the amount of oil available in the economy. We calibrate our model with economic aggregate data and crude oil futures prices. The models does a good job in matching the first two moments of the futures curves and the average consumption of oil-output and output-consumption of capital ratios from the macroeconomic data. The calibration results suggest the presence of convex adjustment costs for the investment in new oil wells. We also test a linear approximation of the equilibrium regime-shifting dynamics implied by our model. Our empirical specification successfully captures spot and futures data. Finally, the specific empirical implementation we use is designed to easily facilitate commodity derivative pricing that is common in two-factor reduced form pricing models.
  6. By: Irina Bezlepkina
    Abstract: This project analyzes whether Russian farms operate under liquidity constraints or under soft budget constraints. A production function that utilizes the concept of total factor productivity will be used. Incorporation of financial variables in the production function will allow analyzing their effects on farm output and suggest agricultural policy implications.
    JEL: Q00
    Date: 2003–04–03
  7. By: Takashi Kurosaki; Humayun Khan
    Abstract: This paper investigates the effects of human capital on productivity using micro panel data of rural households in the NorthWest Frontier Province, Pakistan, where a substantial job stratification is observed in terms of income and education. To clarify the mechanism underlying this stratification, the human capital effects are estimated for wages(individual level) and for self-employed activities(household level), and for farm and non-farm sectors. Estimation results show a clear contrast between farm and non-farm sectors - wages and productivity in non-farm activities rise with education at an increasing rate, whereas those in agriculture respond only to the primary education.
    Keywords: human capital, returns to education, non-farm employment, self-employment
    JEL: O12 J24 Q12
    Date: 2004–11
  8. By: Henk. L.M. Kox
    Abstract: The paper analyses the forces that shape demand and supply processes in the market for cocoa powder. A brief statistical summary is given of the main trends in international demand and production, and the spatial shifts in cocoa processing. Ample attention is given to the role of technology substitution and price factors in production decisions. The paper separately analyses the role of price, income levels and government regulation in the demand for cocoa powder. In the final part of the paper, all preceding elements are brought together in an integrated simulation model of the cocoa processing industry, showing the interactions between the market for cocoa powder and other elements of the cocoa industry (cocoa, cocoa butter, cocoa liquor, chocolate). Empirical evidence is presented with regard to main parameters of the model.
    Keywords: cocoa, cocoa powder, industry study, simulation model, intermediate products, government regulation
    JEL: D24 F14 L11 L19 L66
    Date: 2004–12–06
  9. By: Robert G. Chambers (Dept of Agricultural and Resource Economics, University of Maryland, College Park); John Quiggin (Department of Economics, University of Queensland)
    Abstract: This paper has two goals. First,we demonstrate that standard arguments and methods from production and duality analysis can be used to provide a comprehensive and general treatment of the value of information for a risk-averse firm with expected-utility (linear-in-probabilities) preferences and a general stochastic technology. Second, we place bounds on the value of information for a risk-averse firm and relate these bounds to characteristics of the technology and the producer's preferences. A particularly striking observation that emerges from this representation is that the most common representation of production uncertainty corresponds to a polar case that trivializes the role that information can play in economic decisionmaking under risk.
    Keywords: state-contingent production, value of information
    JEL: D8
  10. By: Robert G. Chambers (Dept of Agricultural and Resource Economics, University of Maryland, College Park); John Quiggin (Department of Economics, University of Queensland)
    Abstract: Separation results, as they are usually understood, refer to conditions under which a firm's production decisions are independent of its risk attitudes. Well-understood situations where separation occurs typically include those where technically feasible production opportunities are replicable in financial markets. This paper gives necessary and sufficient conditions for separation that go beyond these well-understood spanning conditions. To do so, we present a unified treatment of the production and financial decisions available to a firm facing frictionless financial markets and a stochastic production technology under minimal assumptions about the firm's technology and objective function.Our main analytical tool is the derivative-cost function, which gives the minimum cost of achieving a state-contingent return vector through a combination of production choices and trade in financial assets.
    Keywords: state-contingent production
    JEL: D81
    Date: 2003–09
  11. By: Simon Grant (Department of Economics, Rice University); John Quiggin (Department of Economics, University of Queensland)
    Abstract: We present a definition of increasing uncertainty, in which an elementary increase in the uncertainty of any act corresponds to the addition of an `elementary bet' that increases consumption by a fixed amount in (relatively) `good' states and decreases consumption by a fixed (and possibly different) amount in (relatively) `bad' states. This definition naturally gives rise to a dual definition of comparative aversion to uncertainty. We characterize this definition for a popular class of generalized models of choice under uncertainty.
    Keywords: uncertainty, ambiguity, risk, non-expected utility
    JEL: C72 D81
    Date: 2004–05
  12. By: John Quiggin (Department of Economics, University of Queensland); Robert G. Chambers (Dept of Agricultural and Resource Economics, University of Maryland, College Park)
    Abstract: The implications of supermodularity for comparative-static analysis in a generalized version of the separable-effort representation of a firm facing stochastic prices and a stochastic technology are. Previous analysis is generalized in two ways. General risk-averse, as opposed to expected-utility, preferences are considered. The stochastic technology is represented by an Arrow-Debreu state-space representation. It is shown that results familiar from the theory of the price taking firm in the absence of risk generalize to the uncertain case.
    Keywords: state-contingent production
    JEL: D81
    Date: 2003–11
  13. By: John Quiggin (Department of Economics, University of Queensland); Robert G. Chambers (Dept of Agricultural and Resource Economics, University of Maryland, College Park)
    Abstract: In this paper, it is shown that a wide range of comparative statics results from expected utility theory can be extended to generalized expected utility models using the tools of supermodularity theory.
    Keywords: isk aversion, Schur concavity, supermodularity
    JEL: D81
    Date: 2004–06
  14. By: Robert G. Chambers (Dept of Agricultural and Resource Economics, University of Maryland, College Park); John Quiggin (Department of Economics, University of Queensland)
    Abstract: This paper presents a dual representation of firm-level and market-level equilibrium behavior for a sole proprietorship economy with competitive and frictionless financial markets and stochastic production opportunities in a two-period setting. The dual equilibrium model is used to state conditions for the firms' production choices to be independent of their risk preferences in equilibrium. These conditions entail Pareto optimality, but do not require either that the firm's consumption choices lie within the span of financial markets or the assumption of an extreme version of linear risk tolerance.
    Keywords: state-contingent production
    JEL: D81
    Date: 2003–12
  15. By: Thomas Bue Bjorner; Lars Garn Hansen; Clifford S. Russell (Department of Economics,
    Abstract: Provision of information on the environmental effects of consumption is often put forward as an appealing alternative to traditional means of environmental regulation such as permits and environmental taxes. When consumers in opinion polls are asked if their purchasing decisions would be influenced by information on environmental or ethical aspects of products, the majority seem very ready to say yes. However, evidence for actual behavior along these lines is still limited. The paper presents an empirical analysis of the effect of a certified environmental label (the Nordic Swan), using a large Danish consumer panel with detailed information on actual purchases from the beginning of 1997 to January 2001 (weekly observations). In 1997, few products with the Nordic Swan label were available on the Danish market, as Denmark did not join the program of the other Nordic countries until April, 1997. Since then a considerable number of brands of different products in the Danish market have obtained the label, and the data includes information on purchases before and after a number of brands obtained the Swan label. In the paper we use a multinomial logit model to quantify the effect of the Swan label on consumers' choices among different brands of toilet paper, paper towels and detergents. It does appear that the Nordic Swan label has had a significant effect on Danish consumers' brand choices for toilet paper and detergents, corresponding to a willingness to pay for the certified environmental label of 10-17% of price of the labelled products. Results are less conclusive for paper towels, but the environmental label appears to have had less influence on the brand choice for the user of paper towels. .
    Keywords: Environmental labelling, information provision, consumer brand choice
    JEL: C25 D12 D64 Q28
    Date: 2002–03
  16. By: Satish Chand
    Abstract: Not available
    JEL: O13
    Date: 2001
  17. By: Tom Kompas; Tuong Nhu Che
    Abstract: Although the Australian dairy industry has performed well it has also faced considerable pressure over the past twenty years. A decline in the terms of trade and major structural change has provided added incentives for the industry to improve productivity. This paper constructs Tornqvist index values to measure and analyse movements in inputs, outputs, total factor productivity (TFP) and the terms of trade for the dairy industry as a whole and for each state over the years 1979 to 1999. Overall, there is clear evidence of a significant increase in the TFP index in the 1990s relative to the 1980s. However, in terms of fitted annual growth rates, there is also evidence of a productivity ‘slow down’ in the 1990s, with the principal exception of New South Wales. Average annual growth in dairy total factor productivity in Australia over the entire twenty-year period is 1.5 per cent, but decreases from 1.8 per cent in the first to 0.9 per cent in the second decade. In Victoria, the largest dairy producer, the growth in TFP in the second decade of the study is virtually zero, with poor weather conditions in the second half of the decade partly to blame. Much of the impressive growth in dairy output in the 1990s can thus be simply attributed to a growth in inputs. Index values for the terms of trade, the share of input costs in total costs and potential drives of productivity change are also examined.
    JEL: F14 O39 Q19
    Date: 2003
  18. By: Tom Kompas; Tuong Nhu Che
    Abstract: The dairy industry plays an important role in both Australia and the world dairy market. Domestically, it is one of the most important agricultural industries, valued at $A3.7 billion a year. Internationally, the industry exports more than $A3 billion a year, making Australia the third largest dairy exporter in the world. Using traditional farm survey input and output data and a unique biannual data set on farm technology use, this paper estimates a stochastic production frontier and technical efficiency model for Australian dairy farms, determining the relative importance of each input in dairy production, the quantitative effects of key technology variables on farm efficiency and overall farm profiles based on the efficiency rankings of dairy producers. Estimated results show that production exhibits constant returns to scale and although feed concentration and the number of cows milked at peak season matter, the key determinants of differences in dairy farm efficiency are the type of dairy shed used and the proportion of irrigated farm area. Overall farm profiles also indicate that those in the high efficiency group employ either rotary or swingover dairy shed technology and have (by far) the largest proportion of land under irrigation.
    JEL: D24 Q19
    Date: 2004
  19. By: Tom Kompas
    Abstract: This paper analyzes the dramatic increases in rice output and productivity in Vietnam due largely to market reform, inducing farmers to work harder and use land more efficiently. The reform process is captured through changes in effort variables and a decomposition of total factor productivity (TFP) due to enhanced incentives for two main reform periods: output contracts (1981-87) and trade liberalization (1988-94). The results show that the more extensive is market reform the larger the increase in TFP and the share of TFP growth due to incentive effects, suggesting that more competitive markets and secure property rights matter greatly. However, in the post-reform period (1995-99), the incentive component of TFP dissipates as a result of falls in the price of rice and slow increases in input prices, especially for hired labour, fertilizer and capital. A stochastic production frontier is estimated to determine what farm-specific factors limit efficiency gains. Results show that farms in the main rice growing regions, those with larger farm size and farms with a higher proportion of rice land ploughed by tractor are more efficient, suggesting the need for additional reforms to augment productvity. In particular, the requirement that rice be grown in every province in Vietnam, restrictions on farm size (especially in the north) and the slow development of rural credit markets for capital and land are seen to restrict the level and growth of efficiency substantially.
    JEL: O13 O47 Q10
    Date: 2004

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