New Economics Papers
on Agricultural Economics
Issue of 2006‒04‒08
eighteen papers chosen by

  1. The Relative Importance of Global Agricultural Subsidies and Market Access By Anderson, Kym; Martin, Will; Valenzuela, Ernesto
  2. WTO's Doha Cotton Initiative: A Tale of Two Issues By Anderson, Kym; Valenzuela, Ernesto
  3. The poverty impact of rural roads : evidence from Bangladesh By Koolwal, Gayatri B.; Bakht, Zaid; Khandker, Shahidur R.
  4. Estimating Heterogeneous Production in Fisheries By Kurt E. Schnier; Christopher M. Anderson; William C. Horrace
  5. Estimating Trade Restrictiveness Indices By Kee, Hiau Looi; Nicita, Alessandro; Olarreaga, Marcelo
  6. Endogenous Trade Policies in a Developing Economy By N.M. Hung; N.V. Quyen
  7. Options and Tradeoffs in Krabi's Coastal Land Use By Tipparat Pongthanapanich
  8. The Role of R&D in Productivity Growth: The Case of Agriculture in New Zealand: 1927 to 2001 By Julia Hall; Grant M Scobie
  9. Tariff Equivalent of Technical Barriers to Trade with Imperfect Substitution and Trade Costs By Chengyan Yue; John C. Beghin; Helen H. Jensen
  10. GM Cotton Adoption, Recent and Prospective: A Global CGE Analysis of Economic Impacts By Anderson, Kym; Jackson, Lee Ann; Valenzuela, Ernesto
  11. Sugar prices, labor income, and poverty in Brazil By Olarreaga, Marcelo; Krivonos, Ekaterina
  12. Quality and Competition: An Empirical Analysis across Industries By Crespi, John M.; Marette, Stéphan
  13. Getting Rich and Eating Out: Consumption of Food Away from Home in Urban China By Ma, Hengyun; Huang, Jikun; Fuller, Frank H.; Rozelle, Scott
  14. Allocating Nutrient Load Reduction across a Watershed: Implications of Different Principles By Feng, Hongli; Jha, Manoj; Gassman, Philip W.
  15. Investigating nonlinear speculation in cattle, corn, and hog futures markets using logistic smooth transition regression models By Andreas Röthig; Carl Chiarella
  16. Identifying Technically Efficient Fishing Vessels: A Non-Empty, Minimal Subset Approach By Alfonso Flores-Lagunes; William C. Horrace; Kurt E. Schnier
  17. Combine Harvester Econometric Model with Forward Speed Optimization By Isaac, N.E.; Quick, G.R.; Birrell, S.J.; Edwards, William M.; Coers, B.A.
  18. Amplifying effects of land-use change on future atmospheric CO2 levels By Vincent Gitz; Philippe Ciais

  1. By: Anderson, Kym; Martin, Will; Valenzuela, Ernesto
    Abstract: The claim by global trade modelers that the potential contribution to global economic welfare of removing agricultural subsidies is less than one-tenth of that from removing agricultural tariffs puzzles many observers. To help explain that result, this paper first compares the OECD and model-based estimates of the extent of the producer distortions (leaving aside consumer distortions), and shows that 75 percent of total support is provided by market access barriers when account is taken of all forms of support to farmers and to agricultural processors globally, and only 19 percent to domestic farm subsidies. We then provide a back-of-the-envelope (BOTE) calculation of the welfare cost of those distortions. Assuming unitary supply and demand elasticities, that BOTE analysis suggests 86 percent of the welfare cost is due to tariffs and only 6 percent to domestic farm subsidies. When the higher costs associated with the greater variability of trade measures relative to domestic support are accounted for, the BOTE estimate of the latter’s share falls to 4 percent. This is close to the 5 percent generated by the most commonly used global model (GTAP) and reported in the paper’s final section.
    Keywords: agricultural protection; computable general equilibrium modeling; economic welfare; trade policy reform
    JEL: C68 D58 Q17 Q18
    Date: 2006–03
  2. By: Anderson, Kym; Valenzuela, Ernesto
    Abstract: Four West African nations have demanded the WTO’s Doha Development Agenda include a Cotton Initiative that involves two issues: cutting cotton subsidies and tariffs, and assisting farm productivity growth in Africa. This paper provides estimates of the potential economic impacts of (a) complete or partial cotton subsidies and import tariffs globally and (b) cotton productivity growth through the adoption of genetically modified (GM) cotton varieties. Use is made of the latest version of the GTAP database and model. Our results confirm that – unlike for other agricultural subsidies and tariffs – for cotton it is subsidy reductions rather than tariff cuts that would make by far the largest impact. For Sub-Saharan Africa the potential gains are huge relative to the effects on them of reforming other merchandise trade policies. And they could be more than doubled if that reform provided the cash for farmers to take advantage of the biotechnology revolution and adopt GM cotton varieties. But those potential gains, and the affordability of switching to costly GM seed, depend crucially on the extent to which high-income countries are willing to lower domestic support to their cotton farmers.
    Keywords: computable general equilibrium modeling; cotton biotechnology; economic welfare; GMOs; subsidy and tariff reform
    JEL: D58 F17 Q16 Q17
    Date: 2006–03
  3. By: Koolwal, Gayatri B.; Bakht, Zaid; Khandker, Shahidur R.
    Abstract: The rationale for public investment in rural roads is that households can better exploit agricultural and nonagricultural opportunities to use labor and capital more efficiently. But significant knowledge gaps remain as to how opportunities provided by roads actually filter back into household outcomes and their distributional consequences. This paper examines the impacts of rural road projects using household-level panel data from Bangladesh. Rural road investments are found to reduce poverty significantly through higher agricultural production, higher wages, lower input and transportation costs, and higher output prices. Rural roads also lead to higher girls ' and boys ' schooling. Road investments are pro-poor, meaning the gains are proportionately higher for the poor than for the non-poor.
    Keywords: Transport Economics Policy & Planning,Rural Roads & Transport,Economic Theory & Research,Rural Transport,Rural Poverty Reduction
    Date: 2006–04–01
  4. By: Kurt E. Schnier (University of Rhode Island, Department of Environmental and Natural Resource Economics, Coastal Institute, 1 Greenhouse Road, Suite 212, Kingston, Rhode Island 02881); Christopher M. Anderson (Department of Environmental and Natural Resource Economics, University of Rhode Island); William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse NY 13244-1020)
    Abstract: Stochastic production frontier models are used extensively in the agricultural and resource economics literature to estimate production functions and technical efficiency, as well as to guide policy. Traditionally these models assume that each agent's production can be specified as a representative, homogeneous function. This paper proposes the synthesis of a latent class regression and an aagricultural production frontier model to estimate technical efficiency while allowing for the possibility of production heterogeneity. We use this model to estimate a latent class production function and efficiency measures for vessels in the Northeast Atlantic herring fishery. Our results suggest that traditional measures of technical efficiency may be incorrect, if heterogeneity of agricultural production exists.
    Keywords: latent class regression, EC algorithm, stochastic production frontier, technical efficiency
    JEL: D24 N52
    Date: 2006–03
  5. By: Kee, Hiau Looi; Nicita, Alessandro; Olarreaga, Marcelo
    Abstract: The objective of this paper is to provide indicators of trade restrictiveness that include both measures of tariff and non-tariff barriers for 91 developing and developed countries. For each country, we estimate three trade restrictiveness indices. The first one captures the extent to which trade policies at home affect domestic welfare. This follows the work of Anderson and Neary (1992, 1994 and 1996). The second index captures the impact of trade distortions on each country’s import bundle. This follows the work of Anderson and Neary (2003). The last index focuses on market access and summarizes the trade distortions imposed by the rest of the world on each country’s export bundle. All indices are estimated for the broad aggregates of manufacturing and agriculture products. Results suggest that poor countries (and those with the highest poverty headcount) tend to be more restrictive, but they also face the highest trade barriers on their export bundle. This is partly explained by the fact that agriculture protection is generally larger than manufacturing protection. NTBs contribute more than 70 percent on average to world protection, underlying their importance for any study on trade protection.
    Keywords: trade restrictiveness indices
    JEL: F10 F11 F13
    Date: 2006–03
  6. By: N.M. Hung; N.V. Quyen
    Abstract: Consider a small developing economy with a manufacturing sector opened to international trade, and an agricultural sector having limited, not to say any, access to world markets. We modify the Grossman and Helpman's influence-driven model of trade policy formation to allow for an endogenously determined wage rate in a three-sector economy where the manufacturing sector can lobby policy makers for favorable policies. Beside protectionist policies, namely an import tariff or an export subsidy, we show that the owners of the specific factor in agriculture - a non-lobby group - have to bear a consumption tax imposed on their products. This would further strengthen the trade protectionist measure, and imply possibly undesirable general equilibrium repercussions: there will be a reallocation of labor to the manufacturing sector which enjoys an output expansion, an output contraction in the agricultural sector, and a lower workers' "real" income.
    JEL: F13
    Date: 2006
  7. By: Tipparat Pongthanapanich (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: This paper explores the tradeoff options for optimal coastal land use in Krabi’s coastal land development zone (CLDZ). Maximizing the net private benefit and maximizing the net environmental benefits, subject to the constraints set by land availability, effluent discharge from shrimp farms, and rice consumption are optimized via multiobjective programming. It is found that although the benefit from present land use pattern is close to the efficient level (Pareto frontier), reallocation of land use and revision of CLDZ are required in order to achieve an efficient outcome of planning. Designating aquaculture zones on the basis of carrying capacity is found to be an important scheme to control the impacts of shrimp farm discharges. The combined measures of carrying capacity and green taxation would lead to economically and environmentally responsible aquaculture. Compliance with aquaculture effluent standard alone could potentially lead to the detrimental optimum, and would be superfluous if aquaculture zones based on carrying capacity were designated.
    Keywords: Coastal management, Pareto frontier, multiobjective programming, Krabi
    JEL: C61 D62 D74 Q24
    Date: 2005–12
  8. By: Julia Hall; Grant M Scobie (New Zealand Treasury)
    Abstract: Productivity growth is a key determinant of rising living standards. The agricultural sector has been an important contributor to the overall growth of productivity in New Zealand. The average rate of multifactor productivity growth in agriculture from 1926-27 to 2000-01 was 1.8%. We find evidence that this rate has been increasing especially since the reforms of the 1980s. This paper estimates the contribution that R&D has made to agricultural productivity. It develops a theoretical framework based on the stock of knowledge available to producers. This model incorporates foreign stocks of knowledge and the spill-in effect for New Zealand. The estimation allows for extended lag effects of research spending on productivity. We find that foreign knowledge is consistently an important factor in explaining the growth of productivity. It appears that the agricultural sector relies heavily on drawing on the foreign stock of knowledge generated off-shore. The contribution of domestic knowledge generated by New Zealand’s investment in R&D is less clear cut. However, there is typically a significant positive relation between domestic knowledge and the growth of productivity. We find a wide range of estimates of the return to domestic R&D. The results are sensitive to the type of model used and the specification of the variables. Based on our preferred model we estimate that investment in domestic R&D has generated an annual rate of return of 17%. The results underscore the importance of foreign knowledge in a small open economy. The very existence of foreign knowledge may be a necessary condition for achieving productivity growth in a small open economy. However in no way could it be argued that this was sufficient. Having a domestic capability that can receive and process the spill-ins from foreign knowledge is vital to capturing the benefits. The challenge is to be able to isolate those effects from aggregate data for the agricultural sector. In that task we claim only modest success.
    Keywords: New Zealand; technological change; R&D; productivity; economics of knowledge; spillovers; rates of return; agriculture
    JEL: O30 O40
    Date: 2006–03
  9. By: Chengyan Yue; John C. Beghin (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Helen H. Jensen (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC))
    Abstract: The price-wedge method yields a tariff-equivalent estimate of technical barriers to trade (TBT). An extension of this method accounts for imperfect substitution between domestic and imported goods and incorporates recent findings on trade costs. We explore the sensitivity of this revamped tariff-equivalent estimate to its determinants (substitution elasticity, preference for home good, trade cost, and to the reference data chosen). We use the approach to investigate the ongoing U.S.-Japan apple trade dispute and find that removing the Japanese TBT would yield limited export gains to the United States. We then draw policy implications of our findings.
    Keywords: apple trade, Japan, price wedge, sanitary and phytosanitary (SPS), tariff equivalent, technical barriers to trade (TBT), trade cost, trade dispute.
    JEL: F1 F18 Q17 Q18
    Date: 2005–11
  10. By: Anderson, Kym; Jackson, Lee Ann; Valenzuela, Ernesto
    Abstract: This paper provides estimates of the economic impact of initial adoption of genetically modified (GM) cotton and of its potential impacts beyond the few countries where it is currently common. Use is made of the latest version of the GTAP database and model. Our results suggest that by following the lead of China and South Africa, adoption of GM cotton varieties by other developing countries – especially in Sub-Saharan Africa – could provide even larger proportionate gains to farmer and national welfare than in those first-adopting countries. Furthermore, those estimated gains are shown to exceed those from a successful campaign under the WTO’s Doha Development Agenda to reduce/remove cotton subsidies and import tariffs globally.
    Keywords: computable general equilibrium modeling; cotton biotechnology; economic welfare; GMOs; subsidy; tariff reform
    JEL: D58 F17 Q16 Q17
    Date: 2006–03
  11. By: Olarreaga, Marcelo; Krivonos, Ekaterina
    Abstract: This paper assesses the impact that a potential liberalization of sugar regimes in OECD countries could have on household labor income and poverty in Brazil. The authors first estimate the extent of price transmission from world markets to 11 Brazilian states to capture the fact that some local markets may be relatively more isolated from changes in world prices. They then simultaneously estimate the impact that changes in domestic sugar prices have on regional wages and employment depending on worker characteristics. Finally, they measure the impact on household income of a 10 percent increase in world sugar prices. Results suggest that workers in the sugar sector and in sugar-producing regions have better employment opportunities and experience larger wage increases. More interestingly, households at the top of the income distribution experience larger income gains due to higher wages, whereas households at the bottom of the distribution experience larger income gains due to movements out of unemployment.
    Keywords: Markets and Market Access,Economic Theory & Research,Agribusiness & Markets,Ag ricultural Trade,Agricultural Industry
    Date: 2006–04–01
  12. By: Crespi, John M.; Marette, Stéphan
    Abstract: This paper empirically explores the link between quality and concentration in a cross-section of manufactured goods. Using concentration data and product quality indicators, an ordered probit estimation explores the impact of concentration on quality that is defined as an index of quality characteristics. The results demonstrate that market concentration and quality are positively correlated across different industries. When industry concentration increases, the likelihood of the product being higher quality increases and the likelihood of observing a lower quality decreases.
    Keywords: concentration, market structure, ordered probit, product differentiation, product quality.
    Date: 2006–03–28
  13. By: Ma, Hengyun; Huang, Jikun; Fuller, Frank H.; Rozelle, Scott
    Abstract: The overall goal of this study is to better understand food-away-from-home (FAFH) consumption in urban China. We use national statistical sources and our own data to examine the trends in FAFH during the late reform period and to analyze the determinants of FAFH demand, examining how different groups of consumers have participated in this new area of consumption. Besides the normal Tobit model for total food expenditure away from home, a system of multivariate Tobit equations was estimated simultaneously for three categories of foods consumed outside of the home. The results show that the rapid increase of FAFH demand, a rise that is fueled by higher incomes, is changing consumption patterns in China’s post-reform urban economy. We also use our findings to illustrate how omission of accounting for FAFH trends by China’s official statisticians has affected the reported trends in national meat supply and demand statistics.
    JEL: D1 Q1 R2
    Date: 2006–02–06
  14. By: Feng, Hongli; Jha, Manoj; Gassman, Philip W.
    Abstract: A watershed based model, the Soil and Water Assessment Tool (SWAT), along with transfer coefficients is used to assess alternative principles of allocating nutrient load reduction in the Raccoon River watershed in central Iowa. Four principles are examined for their cost-effectiveness and impacts on water quality: absolute equity, equity based on ability, critical area targeting, and geographic proximity. Based on SWAT simulation results, transfer coefficients are calculated for the effects of nitrogen application reduction. We find both critical area targeting and downstream focus (an example of geographic proximity) can be more expensive than equal allocation, a manifestation of absolute equity. Unless abatement costs are quite heterogeneous across the subwatersheds, the least-cost allocation (an application of the principle of equity based on ability) have a potential of cost savings of about 10% compared to equal allocation. We also find that the gap between nitrogen loading estimated from transfer coefficients and nitrogen loading predicted by SWAT simulation is small (in general less than 5%). This suggests that transfer coefficients can be a useful tool for watershed nutrient planning. Sensitivity analyses suggest that these results are robust with respect to different degrees of nitrogen reduction and how much other conservation practices are used.
    Keywords: Least-cost allocation, Soil and Water Assessment Tool (SWAT), Transfer coefficients
    JEL: Q5
    Date: 2006–03–24
  15. By: Andreas Röthig (Institut für Volkswirtschaftslehre (Department of Economics), Technische Universität Darmstadt (Darmstadt University of Technology)); Carl Chiarella (School of Finance and Economics, University of Technology, Sydney, Australia)
    Abstract: This article explores nonlinearities in the response of speculators' trading activity to price changes in live cattle, corn, and lean hog futures markets. Analyzing weekly data from March 4, 1997 to December 27, 2005, we reject linearity in all of these markets. Using smooth transition regression models, we find a similar structure of nonlinearities with regard to the number of different regimes, the choice of the transition variable, and the value at which the transition occurs.
    Keywords: Futures markets, speculation, nonlinear dynamics, smooth transition regression model.
    JEL: G10 G11 C22 C53
    Date: 2006–02
  16. By: Alfonso Flores-Lagunes (University of Arizona); William C. Horrace (Center for Policy Research, Maxwell School, Syracuse University, Syracuse NY 13244-1020); Kurt E. Schnier (University of Rhode Island)
    Abstract: There is a growing resource economics literature, concerning the estimation of the technical efficiency of fishing vessels utilizing the stochastic frontier model. In these models, vessel output is regressed on a linear function of vessel inputs and a random composed error. Using parametric assumptions on the regression residual, estimates of vessel technical efficiency are calculated as the mean of a truncated normal distribution and are often reported in a rank statistic as a measure of a captain's skill and used to estimate excess capacity within fisheries. We demonstrate analytically that these measures are potentially flawed, and extend the results of Horrace (2005) to estimate captain skill for thirty-nine vessels in the Northeast Atlantic herring fleet, based on homogeneous and heterogeneous production functions within the fleet. When homogeneous production is assumed, we find inferential inconsistencies between our methods and the methods of ranking the means of the technical inefficiency distributions for each vessel. When production is allowed to be heterogeneous, these inconsistencies are mitigated.
    JEL: C12 C16 D24
    Date: 2006–03
  17. By: Isaac, N.E.; Quick, G.R.; Birrell, S.J.; Edwards, William M.; Coers, B.A.
    Abstract: A combine harvester econometric simulation model was developed with the goal of matching the combine forward speed to the maximum harvested net income per acre. The model considers the machinery management costs of owning a combine and platform header for harvesting wwheat.
    Keywords: combine harvesters, econometric modeling, machinery management, yield monitor
    JEL: Q1
    Date: 2006–03–22
  18. By: Vincent Gitz (CIRED - Centre International de Recherche sur l'Environnement et le Développement - - [CNRS : UMR8568] - [] - [Ecole des Hautes Etudes en Sciences Sociales][Ecole Nationale du Génie Rural des Eaux et des Forêts][Ecole Nationale des Ponts et Chaussées]); Philippe Ciais (LSCE - Laboratoire des sciences du climat et de l'environnement - - [CNRS : UMR1572][CEA] - [] - [])
    Abstract: We constructed a model to analyze the interactions between land-use change and atmospheric CO2 during the recent past and for the future. The primary impact of the conversion of forested lands to cultivated lands is to increase atmospheric CO2, via losses of biomass and soil carbon to the atmosphere. This increase is likely to continue in the next decades, but its magnitude can vary according to each land-use scenario. We show that this first-order effect is further amplified by the correlated diminution of terrestrial sinks, because when croplands replace forests, the turnover time of excess carbon in the biosphere decreases, and hence the sink capacity of terrestrial ecosystems decreases. This effect acts to further increase by up to 100 ppm the CO2 level reached by 2100, and it is of<br />the same order of magnitude, although smaller, than climate-carbon feedbacks. Uncertainties on the magnitude of this land-use induced effect are large, because of uncertainties in the sink role of terrestrial ecosystems in the future and because of uncertainties inherent to the modeling of land-use induced carbon emissions. Such an extra rise in atmospheric CO2 is however partially offset by the ocean reservoir and by sinks operating over undisturbed, pristine ecosystems, suggesting that conserving pristine forests with long turnover times might be efficient in mitigating the greenhouse effect
    Keywords: land-use change; carbon cycle; future scenarios
    Date: 2006–03–30

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