New Economics Papers
on Agricultural Economics
Issue of 2005‒10‒29
twenty papers chosen by

  1. Environmental Conservation in Agriculture: Land Retirement vs. Changing Practices on Working Land By Kling, Catherine L.; Feng, Hongli; Kurkalova, Lyubov; Gassman, Philip W.
  2. Economic and Environmental Co-benefits of Carbon Sequestration in Agricultural Soils: Retiring Agricultural Land in the Upper Mississippi River Basin By Kling, Catherine L.; Feng, Hongli; Kurkalova, Lyubov; Gassman, Philip W.
  4. CAP Reform and the Doha Development Agenda By Pitou van Dijck; Gerrit Faber
  5. Key emerging and conceptual issues in the development of the rural non-farm economy in developing countries and transition economies By Junior Davis; Dirk Bezemer
  6. The rural non-farm economy, Livelihoods and their By Junior Davis
  7. Patterns of rural non-farm diversification and employment in By Junior Davis; Adriana Cristoiu
  9. The rural non-farm economy and poverty alleviation in Armenia, Georgia and Romania: A synthesis of findings. By Junior Davis; Dirk Bezemer; Monica Janowski; Tiago Wandschneider
  10. Cooperatives and Contracting in Agriculture: The Case of West Liberty Foods By Ginder, Roger; Hueth, Brent; Marcoul, Philippe
  11. The rural non-agricultural economy in transition countries: Enterprise level findings from Armenia By Dirk Bezemer; Junior Davis
  12. Managing Change: Australian structural adjustment lessons for water By Jim McColl; Michael Young, 2005.
  13. Rural Non-Farm Economic Development and Poverty Alleviation in Romania By Junior Davis; Dirk Bezemer
  14. Intra-family succession in Italian farms By Alessandro Corsi
  15. Do Cash Transfers to Farmers Reduce Migration? Procampo in Mexico By Gabriel Gonzalez-Konig; Quentin Wodon
  16. Non-farm employment in small-scale enterprises in Romania: policy and development issues By Junior Davis; Angela Gaburici
  17. Production and Abatement Distortions under Noisy Green Taxes By Feng, Hongli; Hennessy, David A.
  18. Tariff Escalation and Invasive Species Risk By Tu, Anh; Beghin, John C.; Gozlan, Estelle
  20. Organization and Strategy of Farmer Specialized Cooperatives in China By Hu, Y.; Huang, Z.; Hendrikse, G.W.J.; Xu, X.

  1. By: Kling, Catherine L.; Feng, Hongli; Kurkalova, Lyubov; Gassman, Philip W.
    Abstract: The study develops a conceptual framework for analyzing the allocation of conservation funds via selectively offering incentive payments to farmers for enrolling in one of two mutually exclusive agricultural conservation programs: retiring land from production or changing farming practices on land that remains in production. We investigate how the existence of a pre-fixed budget allocation between the programs affects the amounts of environmental benefits obtainable under alternative policy implementation schemes. The framework is applied to a major agricultural production region using field-scale data in conjunction with empirical models of land retirement and conservation tillage adoption, and a biophysical process simulation model for the environmental benefits of carbon sequestration and reduction in soil erosion.
    Keywords: Conservation Reserve Program, land retirement, working land
    Date: 2005–10–17
  2. By: Kling, Catherine L.; Feng, Hongli; Kurkalova, Lyubov; Gassman, Philip W.
    Abstract: This study investigates the carbon sequestration potential and co-benefits from policies aimed at retiring agricultural land in the Upper Mississippi River Basin, a large, heavily agricultural area. We extend the empirical measurement of co-benefits from the previous focus on environmental benenfits to include economic transfers. These transfers have often been mentioned as a co-benenfit, but little empirical work measruring the potential magnitude of these transfers has previously been undertaken. We compare and contrast five targeting schemes, each based on maximizing different physical environmental measures, including carbon sequestration, soil erosion, nitrogen runoff, nitrogen leaching, as well as the area enrolled in the program. In each case, the other environmental benefits and economic transfers are computed. We find that the geographic distribution of co-benefits (including economic transfers) varies significantly with the benefit targeted, implying that policy design related to targeting can have very important implications for both environmental condition and income distributions in sub-regions.
    Keywords: carbon sequestration, co-benefits, co-effects, economic transfers, environmental benefits targeting, Upper Mississippi River Basin
    Date: 2005–10–17
  3. By: Sarbajit Chaudhuri (Dept. of Economics, Calcutta University, India); Asis Kumar Banerjee (Dept. of Economics, Calcutta University, India)
    Abstract: This paper builds a model of fragmented duopsony in backward agriculture following Basu and Bell (1991) in which the purchasers (traders) have captive markets each but compete in a contested market. We focus on the formation of captive markets through trader-farmer interlinkage in the form of interlinked credit-product contracts (ICPCs). ICPC (or the formation of captive markets) is not an entry-preventive strategy in the model. Its motive is to push the farmers to their reservation income level. However, the captive and the contested markets are linked by the requirement that the reservation income of a captive farmer has to equal the income of a farmer in the contested market. In general, in our model strategic considerations determine the extent of use of ICPCs rather than explaining their existence. In this set-up we examine the effects of trade liberalization in agriculture on the village economy. We show that a reduction in the credit subsidy will raise the size of the captive market, leads to deterioration in the welfare of the farmers and may lower the agricultural productivity of the economy. On the contrary, an increase in the international price of the crop unambiguously improves the welfare of the farmers but the effect on the agricultural productivity is ambiguous. The paper argues that unless the developed countries liberalize trade in their agricultural sector, it would be premature for the developing countries to go in for agricultural trade liberalization and remove all farm subsidies, as this policy may in fact be counterproductive.
    Keywords: Trader, Farmer, Captive segment, Contested segment, Interlinkage, Nash equilibrium, Trade liberalization in agriculture
    JEL: Q13 D43 C70
    Date: 2005–10–23
  4. By: Pitou van Dijck; Gerrit Faber
    Abstract: The CAP reforms that the EU accepted in June 2003 will partially decouple direct income payments to farmers from production and make these payments conditional on cross-compliance. The reforms are driven by enlargement of EU membership, budgetary constraints, mounting pressures from diverse animal welfare, consumer and conservationist non-governmental organisations, and by external pressure for a less distorting agricultural policy. The paper addresses the issue whether these CAP reforms will contribute to an agreement in the Doha Development Round that will liberalize world trade in agricultural products. The paper argues that the 2003 CAP reforms have enabled the EU to participate more constructively in the multilateral trade negotiations compared to the Uruguay Round. However, the reforms do not create room for improved access to EU agricultural markets for third country producers. These countries insist on substantial tariff reductions that, if realized, will force down the relatively high internal EU prices, which would mean a further restructuring of the sector.
    Keywords: Agriculture, Trade Policy, Agricultural Policy, European Union, World Trade Organization.
    JEL: F13 F14 F15 Q18
    Date: 2003–12
  5. By: Junior Davis (Natural Resources Institute); Dirk Bezemer (University of Groningen)
    Abstract: The rural non-farm economy (RNFE) is of interest to governments, multilateral donor organisations, non-governmental organisations (NGOs) and development practitioners because of its increasing prevalence in both developing and transition economies. In many parts of the world, the number of poor people in rural areas exceeds the capacity of agriculture to provide sustainable livelihood opportunities. Even with a decline in fertility rates and a slowing of population growth, this situation will not change significantly. Out-migration is not possible for all types of people, and urban centres cannot (or should not, for economic and social reasons) be assumed capable of providing adequate livelihood opportunities for all those unable to make a living in agriculture. For these reasons, a healthy RNFE holds out the prospect of improved livelihoods for people living in rural areas. This set of circumstances puts the spotlight on the RNFE as a potential vehicle for poverty reduction in rural areas. This paper reviews contemporary empirical and conceptual thinking on the economics of diversity, non- agricultural growth and the rural non-farm economy.
    Keywords: Rural non-farm economy, non-agricultural growth, employment, livelihoods, diversity
    JEL: O P
    Date: 2005–10–27
  6. By: Junior Davis (Natural Resources Institute)
    Abstract: The rural non-farm economy (RNFE) may be defined as comprising all those activities associated with waged work or self-employment in income generating activities (including income in-kind) that are not agricultural but which generate income (including remittances etc.) rural areas. In some contexts rural non-farm activities are also important sources of local economic growth (e.g. tourism, mining, timber processing, etc). The promotion of diversification of activities may be an important component of poverty alleviation in rural areas. The rural non-farm economy is of great importance to the rural economy for its productive and employment effects, while the income it provides to rural households represents a substantial and growing share of rural incomes. Often this share is particularly high for the rural poor. There is evidence that these contributions are becoming increasingly significant for food security, poverty alleviation and farm sector competitiveness and productivity. . In the light of increasing donor and developing country interest in the sharing of good practice for methodological approaches in analysis, policy intervention and support to the rural non-farm economy, we consider it timely to draw out the key emerging lessons from international experience to date. These have, where appropriate, been set in the context of current thinking on the topic and aim to add value to the debate through drawing on evidenced based work, new empirical data and consensus based dialogue.
    Keywords: Rural non-farm economy, diversification, economic development, livelihoods
    JEL: O P
    Date: 2005–10–27
  7. By: Junior Davis (Natural Resources Institute); Adriana Cristoiu (Imperial College at Wye)
    Abstract: The radical changes that have occurred in the Romanian economy during the last decade have created new pressures on the country’s rural areas. Increasing industrial unemployment generated an urban-rural migratory flow of the population. The collapse of the agri-industrial processing and industrial sector increased rural unemployment. Since 1991, land reform has also generated new relationships in rural areas, and a massive redistribution of land. However, agriculture continues to function inefficiently, and is unable to provide a decent and sustainable standard of living for most rural inhabitants. Therefore, many donors and multilateral agencies are focusing on the potential of the rural non-farm economy (RNFE) and more specifically, Non-Farm Diversification (henceforth NFD) to reduce rural underemployment. NFD through the development of the RNFE may also provide means of increasing rural incomes, assist the improved utilisation of locally available resources and promote a better standard of living for rural population through enhanced non-farm employment opportunities and growth. There are several reasons underlying the rural poor’ decision to diversify: low on-farm incomes or returns on labour, the existence of a surplus of resources (land, capital, labour or knowledge), as a strategy to spread risk, or to smooth the impact of the fluctuations in a unique source of income (e.g. agriculture). The present paper relies on community-level data from a survey conducted in two Romanian Counties, Dolj and Brasov, to analyse the main determinants of NFD in rural areas. The main findings are placed in a national context and policy proposals are advanced.
    Keywords: rural non-farm diversification and employment, transition economies, livelihood diversification
    JEL: O P
    Date: 2005–10–27
  8. By: Sarbajit Chaudhuri (Dept. of Economics, Calcutta University, India)
    Abstract: In a production structure reasonable for a developing economy this note shows that there may arise a conflict between the worldwide liberalized trade policies in agriculture, which raise the price of the economy’s primary exportable commodity, and the inflow of foreign capital into the economy. However, if the economy strictly adheres to the different facets of the agricultural trade liberalization policies, e.g. the removal of the indirect farm subsidies, the paper argues that the possible conflict may be avoided. The paper provides a theoretical basis for the removal of the farm subsidies if the economy wants to develop its technologically more advanced sectors with an adequate supply of foreign capital.
    Keywords: Liberalized trade policy in agriculture; foreign capital inflow; rate of return on foreign capital; fertilizer subsidy
    JEL: F10 F13 O19
    Date: 2005–10–23
  9. By: Junior Davis (Natural Resources Institute); Dirk Bezemer (University of Groningen); Monica Janowski (Natural Resources Institute); Tiago Wandschneider (Natural Resources Institute)
    Abstract: The aims of this study are to improve understanding of the dynamics of the rural non-farm economy in providing employment and income diversification opportunities in Armenia, Georgia and Romania. The study aims to focus on improving the well-being and livelihoods of the rural population, through developing their capacity to access resources and actively participate in non-farm rural enterprise and employment opportunities. We place emphasis on the diversity and diversification of income sources in the face of vulnerability to shocks and stresses - particularly on the part of the poorest members of society; and provide an in-depth analysis of the context (socio-cultural, economic, agronomic) in which non-farm rural livelihood options are currently pursued and in which new options can be developed.
    Keywords: rural non-farm economy, poverty, diversity, non-agricultural growth, transition economies, Central Asia, Balkans
    JEL: O P
    Date: 2005–10–27
  10. By: Ginder, Roger; Hueth, Brent; Marcoul, Philippe
    Abstract: The West Liberty Foods turkey cooperative was formed in 1996 to purchase the assets and assume operations of Louis Rich Foods (an investor-owned processing firm), which, at the time, announced the imminent shutdown of its West Liberty, Iowa, processing facility. We study the creation and performance of this “new generation” cooperative using field interviews with grower members and company management. We describe changes, before and after the buyout, in the contractual apparatus used for procuring live turkeys, and in the communication requirements, work expectations, and financial positions of growers. During the private ownership period, most of the inputs (except labor and facilities) were provided by the firm; there was substantial supervision of the growers’ actions; growers faced little price and production risk; and growers’ equity was due largely to ownership of land and other farm assets. Our interviews reveal that, after cooperative formation, growers were exposed to considerable additional risk; monitoring of growers by the firm was less intensive; grower time and effort commitments to turkey production increased substantially; and a significant fraction of firm (cooperative) equity came from growers’ willingness to leverage their farm and personal assets (and hence indirectly their existing relationships with local lenders). We argue that some of these changes are consistent with a financial contract where asset pledging and its corollary risk generate higher work effort by growers and a reduction in agency rents. These economies likely compensate for an organizational deadweight loss traditionally associated with cooperative governance.
    Keywords: Cooperatives, procurement, financial contracting, agriculture
    Date: 2005–10–18
  11. By: Dirk Bezemer (University of Groningen); Junior Davis (Natural Resources Institute)
    Abstract: In this paper the findings of a survey conducted in June 2001 in Armenia are summarised. The aim was to gain insight into the nature of the rural non-farm economy (RNFE) in the country. For that purpose, 21 rural communities in 3 regions (called marzes in Armenian) were non-randomly selected. These regions were Ararat, Gegharkunik and Syunik . Since a prime motivation of the research is to study the potential of the NFRE to alleviate rural poverty, selection criteria included poverty levels and the level of development of the RNFE.
    Keywords: Enterprise development, rural-non-farm economy, poverty, transition economies
    JEL: O P
    Date: 2005–10–27
  12. By: Jim McColl (Policy and Economics Research Unit,CSIRO Land and Water); Michael Young, 2005. (Policy and Economics Research Unit,CSIRO Land and Water)
    Abstract: The purpose of this report is to search Australia's extensive experience in running and reviewing structural adjustment programs for insights of relevance to water reform.
    Keywords: Water;Australia;Water reform;structural adjustment;rural;agricultural;policy.
    JEL: Q0 Q1 Q2
    Date: 2005–10
  13. By: Junior Davis (Natural Resources Institute); Dirk Bezemer (University of Groenigen)
    Abstract: Since the collapse of the Soviet Union, the Romanian rural economy has undergone massive changes. Increased urban unemployment has stimulated migration from towns to rural areas. Meanwhile, rural industries that were subsidised under communism have collapsed, causing rural unemployment. Subsistence agriculture is now vitally important to rural livelihoods. It is a low-risk option for poor people, but it does little to stimulate economic growth. There is a growing focus on the rural non- farm economy (RNFE) as a way of stimulating economic growth that will make use of the high labour supply and improve livelihoods. It is also important for Romania’s EU accession, as the development of remunerative and sustainable non-farm employment opportunities will have important effects in terms of the use of future structural funds. This paper tests the hypothesis that two processes are apparent: demand-pull, where rural people respond to new opportunities; and distress-push, where the poorest are driven to seek non-farm employment as a survival strategy. In addition, it also considers how the RNFE contributes to poverty alleviation. The empirical work presented in this paper is primarily based on a large (nationwide) rural household survey and other field- related research representing a broad range of methodologies.
    Keywords: Rural non-farm economy, non-agricultural employment, livelihood diversity, transition economies
    JEL: O P
    Date: 2005–10–27
  14. By: Alessandro Corsi
    Abstract: The succession in family farm is a critical issue: it not only involves the transmission of wealth, but also of specific skills and of specific farm management techniques. Since a large share of farmers in Italy are old, the lack of prospective successors in their farms would imply that a change in the farm management will take place. In some cases this could be a beneficial process, leading to the enlargement of neighbouring farms and, hence, to a greater efficiency but in other cases it might lead to the abandonment of farms and to degradation of the territory. It is therefore important to explore the conditions under which a farm household can transmit the farm management within the household itself. In our paper we try to assess which are the determinants of the likely farm succession within the family and we test in a developed country the hypothesis put forward by Rosenzweig and Wolpin (1985) for LDCs that farm-specific knowledge creates an incentive for children to take on the farm. To do this, we exploit a sample of individual farm data in Piedmont Region drawn from the 2000 Agricultural Census. Taking the presence of children and relatives working predominantly or exclusively on the farm as indicators for the presence of prospective successors, we estimate by a multinomial logit its determinants. Explanatory variables include personal characteristics of the operators, including their work status, and farm characteristics. The results suggest that specific knowledge does favour farm succession within the household, along with other variables already considered in the previous literature; nevertheless, the effects of these variables are in general weak, and more research is needed to identify them.
    Keywords: family, succession
    JEL: J0 J38
    Date: 2004–09
  15. By: Gabriel Gonzalez-Konig (School of Economics, Universidad de Guanajuato); Quentin Wodon (The World Bank)
    Abstract: This paper provides a theoretical model to suggest that if cash transfers for farmers have or are perceived to have conditionalities in terms of location (whereby at least some household members must remain at the place of origin to benefit from the transfers), their impact on temporary and permanent migration is uncertain a priori. To test empirically what the impact of the transfers could be, we use data on Procampo, a large transfer program for rural farmers in Mexico implemented since 1994. We find that the impact of Procampo on both permanent and temporary migration has been negative.
    JEL: O15 Q18 J61
  16. By: Junior Davis (Natural Resources Institute); Angela Gaburici (Romanian Academy of Economic Sciences)
    Abstract: The aim of this paper is to summarise the results of a non-farm micro- enterprise survey in rural and peri-urban Romania and to examine their impact on the development of sustainable rural livelihoods. As these firms operate in fixed locations and are therefore more easily located and observed, most of the data presented s based on our survey of firms in Brasov and Dolj counties of Romania. This data is complemented with information about unregistered gathering, hawking, and handicraft activities collected through our qualitative social development studies in the same counties. Both categories of information document the situation at a particular point in time and can provide insights into the functioning of enterprises, but not on the dynamics of change. There are however, some initial complications in understanding the operation of small non-farm firms. On the one hand, for many of those involved in rural non-farm enterprise activities, there is no difference between activities to meet their subsistence needs and producing for the market. Thus, they sell what is surplus to their needs or in response to the opportunity selling provides to generate additional cash income. On the other hand, many of the registered rural non-farm firms are commercially oriented and operate in a competitive market. We consider the nature and extent of rural non-farm enterprises and outline their main characteristics.
    Keywords: Rural Non-Farm, Economic Development, poverty, enterprise development
    JEL: O P
    Date: 2005–10–27
  17. By: Feng, Hongli; Hennessy, David A.
    Abstract: Pigouvian taxes are typically imposed in situations where there is imperfect knowledge on the extent of damage caused by a producing firm. A regulator imposing imperfectly informed Pigouvian taxes may cause the firms that should (should not) produce to shut down (produce). In this paper we use a Bayesian information framework to identify optimal signal-conditioned taxes in the presence of such losses. The tax system involves reducing (increasing) taxes on firms identified as causing high (low) damage. Unfortunately, when an abatement decision has to be made, the tax system that minimizes production distortions also dampens the incentive to abate. In the absence of wrong-firm concerns, a regulator can solve the problem by not adjusting taxes for signal noise. When wrong-firm losses are a concern, the regulator has to trade off losses from distorted production incentives with losses from distorted abatement incentives. The most appropriate policy may involve a combination of instruments.
    Keywords: conditioning; heterogeneity; informativeness; Pigouvian tax; signaling
    Date: 2005–10–20
  18. By: Tu, Anh; Beghin, John C.; Gozlan, Estelle
    Abstract: We investigate the interface between trade and invasive species (IS) risk, focusing on the existing tariff escalation in agro-forestry product markets and its implication for IS risk. Tariff escalation in processed agro-forestry products exacerbates the risk of IS by biasing trade flows toward increased trade of primary commodity flows and against processed-product trade. We show that reducing tariff escalation by lowering the tariff on processed goods increases allocative efficiency and reduces the IS externality, a win-win situation. We also identify policy menus for trade reforms involving tariffs on both raw input and processed goods, leading to win-win situations.
    Keywords: agro-forestry products, exotic pest, international trade, invasive species, tariff escalation, trade flows.
    Date: 2005–10–18
  19. By: Jorge Higinio Maldonado
    Abstract: Increased access to education will be key in any efforts to improve the quality of rural life and the welfare of the next generation in developing countries. Microfinance programshave been among components of strategies for poverty alleviation that have attempted to address this challenge. This essay uses data from three different surveys of households of clients of microfinance Organizations (MFOs) in Bolivia to examine several channels through which microfinance may exert an influence on Education outcomes. Five channels are identified, designated as income, risk-management, child-labor demand, gender, and information effects. Based on an econometric specification that explains schooling decisions at the household level, regression models are used to examine determinants of education achievements and to make inferences about the potential influence of microfinance, through these channels, on those achievements. The results challenge usual assumptions in microfinance programs. In particular, for some ranges of household income and some types of borrowers, access to loans has conflicting effects on school enrollment. On the one hand, loans increase the demand for education as a result of income, risk-management, gender, and information effects. On the other hand, credit-constrained households that cultivate land or operate labor-intensive microenterprises discover new demands for child labor, either for farming, working in the microenterprise, or taking care of siblings while the mothers operate the new or expanded business. Significant program and policy consequences are derived from these paradoxical results.
    Keywords: microfinance
    JEL: C25
    Date: 2005–08–10
  20. By: Hu, Y.; Huang, Z.; Hendrikse, G.W.J.; Xu, X. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: A description and analysis of China?s Farmer Specialized Cooperatives is presented. Data is presented regarding the historical development of farmer cooperatives in China, the membership composition of a sample of 66 farmer cooperatives in the Zhejiang province, and the various attributes (governance, quality control system, and strategy) of a watermelon cooperative in this province. Many cooperatives are being transformed in organizations with a market orientation. These cooperatives exhibit substantial heterogeneity, in terms of farmers being member and skewness in the distribution of control rights. Human asset specificity in terms of establishing and maintaining relations and access to markets seems to be more important than physical asset specificity in accounting for governance structure choice in the current institutional setting.
    Keywords: Farmer Cooperative;China;Governance;
    Date: 2005–10–18

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