New Economics Papers
on Agricultural Economics
Issue of 2006‒06‒03
24 papers chosen by

  1. 05-02 "Understanding the Farm Problem: Six Common Errors in Presenting Farm Statistics" By Timothy A. Wise
  2. High value products, supermarkets and vertical arrangements in Indonesia By Chowdhury, Shyamal; Gulati, Ashok; Gumbira-Sa'id, E.
  3. Policy options for increasing crop productivity and reducing soil nutrient depletion and poverty in Uganda By Nkonya, Ephraim M.; Pender, John; Kaizzi, Crammer; Edward, Kato; Mugarura, Samuel
  4. New risks and opportunities for food security By von Braun, Joachim; Rosegrant, Mark W.; Pandya-Lorch, Rajul; Cohen, Marc J.; Cline, Sarah A.; Brown, Mary Ashby; Bos, Maria Soledad
  7. When are Payments for Environmental Services Beneficial to the Poor? By David Zilberman; Leslie Lipper; Nancy McCarthy
  8. Agricultural policies in India By Mullen, Kathleen; Orden, David; Gulati, Ashok
  9. Energy policies and their impact on establishing nature areas in Poland - an AGE analysis By Adriana Ignaciuk
  10. Interlocking Transactions : Do they Restrain the Emergence of Rice Producers' organizations in Cambodia ? By Lemeilleur, S.; Codron, J.M.; Fares, M.
  11. Trade Policy and Pro-Poor Growth By Rolf Maier
  12. Water (management) as a decisive factor in the land use planning of agriculture in an urbanising context By Georges Allaert; Hans Leinfelder; Peter Vanden Abeele; David Verhoestraete
  14. Some Key Issues in Policy, Pricing, Regulation, and Financing of Irrigation Development in India Today By Morris Sebastian
  15. Further explorations of interactions between agricultural policy and regional growth in Western Europe - approaches to nonstationarity in spatial econometrics By Roger Bivand; Rolf Brunstad
  16. Econometric Analysis for the rural sector in Greek economy By Giovanis Elephtherios
  17. Genetic Land - Modeling land use change using evolutionary algorithms By Maria Julia Seixas; João Pedro Nunes; Pedro Lourenço; Fernando Lobo; Paulo Condado
  18. Assessing management options for weed control with demanders and non-demanders in a choice experiment By Carlsson, Fredrik; Kataria, Mitesh
  19. MANUFACTURER AND RETAILER BRANDS IN FOOD RETAIL ASSORTMENTS Notes from a shopping trip across Europe By Esbjerg, Lars; Grunert, Klaus G.; Bech-Larsen, Tino; Juhl, Hans Jørn; Brunsø, Karen
  20. Public Preferences for Land uses’ changes - valuing urban regeneration projects at the Venice Arsenale By Patrizia Riganti; Anna Alberini; Alberto Longo
  21. Income, Energy Taxation, and the Environment: An Econometric Analysis By Ghalwash, Tarek
  22. La régulation et l’harmonisation internationale des programmes d’écolabels sur les produits et les services By Sophie Lavallée; Kristin Bartenstein
  23. L’écolabel est-il un outil du protectionnisme « vert »? By Kristin Bartenstein; Sophie Lavallée
  24. Allocation of CO2 Emissions Allowances in the Regional Greenhouse Gas Cap-and-Trade Program By Burtraw, Dallas; Palmer, Karen; Kahn, Daniel

  1. By: Timothy A. Wise
    Abstract: Farm statistics are regularly quoted in the press and in policy circles, often in misleading ways. This, in turn, can easily lead to mistaken policies. Two examples of misleading statistical presentation include the common refrain that farm incomes are now higher than non-farm incomes, so there is little justification, from either an equity or a social justice perspective, for funding farm programs. Another is the oft-quoted statement that 60% of farmers and ranchers never get any government support at all (Environmental Working Group 2004). It is not just the press and advocacy organizations that present data in misleading ways. Noted agricultural economist Bruce Gardner, in a recent New York Times article, argued that small family farms were thriving. He cited the slowed rates of farm loss and the growth of “non-traditional” small farms sustained by off-farm income. As he noted, 90% of farm household income is from off-farm sources, and as a result farmers now enjoy living standards above the national average (Gardner 2005). All of the above statements are true – and truly misleading. The same data present a very different story when treated more carefully. Small and mid-sized full-time family farms have incomes at or below the national average, and less than half of that income is from their full-time-farming activities. A large majority of this group, which accounts for over three-quarters of full-time farmers, receives government farm-support payments of some sort, and many depend on them to stay above the poverty line and to stay in farming. The largest group of farms in the United States today are so-called “rural residence farms,” which are indeed thriving as Gardner points out, but are doing so primarily because they are part-time operations with ample outside sources of income, from retirement or from full-time non-farm careers. This paper is intended to both highlight some of the common errors in depicting the farm sector and present a more accurate image of family farming in the United States. Based on readily available data from the U.S. Department of Agriculture’s Economic Research Service, I identify six common errors: 1. Including “Rural Residence Farms,” which represent two-thirds of all U.S. farms but do not farm for a living, in the totals for the farm sector. This leads to the misleading statement that a minority of farms get farm payments. A minority of part-time farmers gets payments, but a significant majority of full-time commercial and family farmers receives farm payments. 1 Comments and other correspondence may be directed to 2 GDAE Working Paper No. 05-02: Understanding the Farm Problem 2. Using averages for the farm sector as a whole when presenting income data. The accurate but misleading statement that average farm household income is 18% higher than that of the non-farm population is rooted in this error. Some 56% of full-time farmers sell less than $100,000 a year and have average incomes only 86% of the U.S. average. 3. Including non-farm income in analyses of farm programs. Family farm households rely heavily on off-farm income to keep their households solvent, getting more than half their incomes from off-farm activities. On the farm they are squeezed between low prices for their products and rising prices for their inputs. 4. Ignoring the impact of land ownership. Farm payments are presented as going to the farmers themselves, but some go to landowners who do not farm the land. Roughly 45% of U.S. farm land is cultivated by operators who do not own the land. 5. Viewing the skewed distribution of farm payments in isolation from the structure of the farm sector itself. Farm payments historically have been based on production, and some still are. Others are based on acreage. Payments are mainly skewed because land and production are highly skewed. To the extent payments remain tied to either production or land ownership, they will continue to go disproportionately to the wealthiest farmers. 6. Presenting farm subsidies as going unfairly to the top 10%-20% of farmers, who don’t need it. Payments are highly concentrated, but the average full-time family farmer, with income around the national average, finds herself in the top 13 percent of payment recipients with modest payments of under $18,000. The most widely used data on individual recipients is misleading: Nearly half of the top 20 subsidy recipients in 2003 went to cooperatives, Indian tribes, and conservation trusts, and the rest went to corporations, not family-owned farms. Again, the data presented here are readily available. Hopefully, this paper will contribute to a more accurate depiction of the family farm sector and the problems it faces, and to a more grounded discussion of the policy reforms that are desperately needed in U.S. farm programs.
  2. By: Chowdhury, Shyamal; Gulati, Ashok; Gumbira-Sa'id, E.
    Abstract: " Indonesian economy has experienced some major changes during the last three decades and transformed from a predominantly agricultural economy to one that relies more heavily on its non-agricultural sector. Within agriculture, there has also been a change in the contribution of different sub sectors and high value products have grown relatively rapidly making agriculture more diversified. Similar to the changes in agricultural production, food consumption in Indonesia has shown a pattern of change over the past three decades, from a diet characterized primarily by the staple foods of cereals and cassava, to one that includes a larger share of fruits, fish, meats, dairy products and processed foods. Alongside the change in composition of food demand, newer forms of retail have also come up commonly known as supermarkets. However, the emergence of modern retailing has other consequences that go beyond consumers. It requires deep integration with farmers and can influence the production and transaction costs at farm level. It can also influence the distribution of value among different agents involved in production, intermediation, and retailing. In this paper we pursue three interrelated objectives. First, we review the structural changes that have taken place in Indonesian agriculture for the last three decades and the state of high value products. Second, we examine the driving forces behind the production of high value products and the constraints that limit their production. Third, we review the emergence of supermarkets and the vertical arrangements among farmers, traders/distributors, and supermarkets. We have relied both on primary and secondary data sources. Most of the secondary data has come from government directorates, different ministries and the central bureau of statistics (CBS) of the Government of Indonesia. In cases where secondary information was not readily available, we have also collected primary data. Our findings suggest that during the last three decades, there has been a significant structural change in Indonesian agriculture and the production of high value commodities and products –estate crops, livestock, fisheries, fruits and vegetables, and floriculture – has grown faster than the cereals. However, the extent of diversification towards high value products has remained limited to few regions and to few products within each sub sector. Factors that have contributed most in diversification are the rapid growth in income and accompanied changes in urban consumption in favor of high value products and agricultural mechanization. The economic crisis that was triggered by the currency crisis has had a long negative impact on agriculture sector. Structural changes in Indonesian agriculture have been accompanied by changes in consumption pattern in urban areas in favor of high value products and by a major change in retailing in the form of growth of modern supermarkets. To cater to the demand of changed urban consumption needs, supermarkets have been integrating with farmers through formal and informal contracts. This vertical relationship between farms and supermarkets that has been emerging in Indonesia has been helpful to follow grades and standards, to improve quality, and to reduce transaction costs and information asymmetries. It has also been helpful to reduce price and production risks at farm level and to ensure a higher price for farmers compared to traditional value chain. However, it seems that the participation of small holders in the vertical relationship depends largely on vendors. Within the vertical chain, supermarkets appropriate a monopsony rent. Important policies that can be drawn from this study are the greater emphasize on rural infrastructure, user right of state-owned estate to smallholders, promotion of public-private partnerships, encouragements of vertical arrangements, grades and standards, and bringing up the modern retailing sector under the purview of regulatory oversights." Authors' Abstract
    Keywords: Diet ,High value agricultural products ,Supermarkets ,
    Date: 2005
  3. By: Nkonya, Ephraim M.; Pender, John; Kaizzi, Crammer; Edward, Kato; Mugarura, Samuel
    Abstract: "This study was conducted with the main objective of determining the linkages between poverty and land management practices in Uganda. The study used the 2002/03 Uganda National Household Survey (UNHS) and more focused data collected from a sub-sample of 851 households of the 2002/03 UNHS sample households. We found that farmers in Uganda deplete about 1.2 percent of the nutrient stock stored in the topsoil per year, which leads to a predicted 0.31 percent reduction in crop productivity. The value of replacing the depleted nutrients using the cheapest inorganic fertilizers is equivalent to about 20 percent of household income obtained from agricultural production. Econometric analysis of the survey results provides evidence of linkages between poverty and land management practices. Land investments increase agricultural productivity and income and conserve natural resources. Many inputs and land management practices increase crop production per acre. We observed an inverse farm size – crop productivity relationship but a negative association of farm size and per capita income. Education of female household members has generally a limited impact on land management, while male education is associated with greater use of inorganic fertilizer. Both female post-secondary and male primary and secondary education are associated with higher crop productivity. Larger families use more erosive practices but realize higher value of crop production per acre but have lower per capita income. Access to financial capital, markets and roads has limited effect on land management. However, access to financial capital and non-farm opportunities increase crop productivity and per capita household income and access to roads contributes to higher per capita household income and less soil nutrient depletion. These results support the Uganda government poverty reduction strategy through building rural roads, and increasing access to financial capital and non-farm opportunities. Both the traditional and the new agricultural extension program increase use of fertilizer and crop productivity, suggesting that investment in extension services could significantly contribute to agricultural modernization and poverty reduction. The results suggest the need to give incentives for technical assistance programs to operate in remote areas, where access to extension services is limited. Perennial crop producers deplete soil nutrients more rapidly, implying the need to promote measures to restore soil nutrients in perennial (especially banana) production areas. We find no significant differences in crop productivity or income per capita associated with differences in land tenure systems. Our findings suggest that customary land tenure, which is the most common form of tenure, is not a constraint to improvements in land productivity or use of sustainable land management. Overall, our results provide general support for the hypothesis that promotion of poverty reduction and agricultural modernization through technical assistance programs and investments in infrastructure and education can improve agricultural productivity and help reduce poverty. However, they also show that some of these investments do not necessarily reduce land degradation, and may contribute to worsening land degradation in the near term. Thus, investing in poverty reduction and agricultural modernization is not sufficient to address the problem of land degradation in Uganda, and must be complemented by greater efforts to address this problem." Authors' Abstract
    Date: 2005
  4. By: von Braun, Joachim; Rosegrant, Mark W.; Pandya-Lorch, Rajul; Cohen, Marc J.; Cline, Sarah A.; Brown, Mary Ashby; Bos, Maria Soledad
    Abstract: "Given the number of undernourished people in the developing world and the increasingly complex risks to food security, policymakers are faced with an enormous agenda. Freeing people from hunger will require more and better-targeted investments, innovations, and policy actions, driven by a keen understanding of the dynamic risks and forces that shape the factors affecting people's access to food and the links with nutrition. The International Food Policy Research Institute's (IFPRI's) International Model for Policy Analysis of Agricultural Commodities and Trade (IMPACT) provides insight into the management of these risks through appropriate policy actions. By projecting future global food scenarios to 2050, IMPACT explores the potential implications of policy action and inaction in several main risk areas as well as the effects on child malnutrition in the developing world, commodity prices, demand, cereal yields, production, and net trade. In the progressive policy actions scenario, which assumes increased investment in rural development, health, education, and agricultural research and development, developing country governments and the international community are able to dramatically reduce the number of food-insecure people, leading to a worldwide decline in hunger. Under these conditions, Latin America and China are able to virtually eliminate child malnutrition by 2050. Bolstered by the development and dissemination of improved technologies and better infrastructure, crop production and yields increase in developing countries. Notably, the bulk of the growth in production is driven by yield increases rather than by expanding land area. Spurred by growth in the agricultural sector, average incomes in developing countries increase. Rising incomes bolster demand for high-value agricultural products, such as meat, dairy, and fruits and vegetables; global livestock production more than doubles, for example. Average per capita calorie supplies for developing countries exceed 3,400 per day, well in excess of minimum requirements. The policy failure scenario assumes greater political discord and more extensive agricultural protectionism, together with the failure of policies to deal with food emergencies related to conflict. Slow growth and trade restrictions lead to stagnation in average per capita calorie availability, which remains only slightly above minimum requirements until after 2030, when availability increases. In addition, crucial investments in agriculture, rural development, and poverty reduction are forgone or displaced. Because of limited investment in agricultural research and technology, this scenario has a high level of crop area expansion as a result of relatively rapid population growth and slim yield improvements in developing countries. This scenario also results in flat maize prices, declining per capita cereal demand, falling beef prices, and relatively flat meat demand. As a result of the policies in this scenario, the number of malnourished children in developing countries rises between 1997 and 2015, after which there are only modest declines. In the technology and natural resource management failure scenario, yield growth falls even more than under the preceding scenario, forcing farmers to move into marginal producing areas, which causes a more rapid expansion of cereal area into less productive land that does not compensate for the yield shortfalls (and causes environmental degradation). As a result, cereal prices rise substantially through 2030 and then fall off only gradually. Beef and other meat prices, which are affected by the price of feed, follow a similar pattern. Developing-country per capita calorie availability is essentially unchanged over 1997–2050 and remains at a barely adequate average level. Given unequal access to the food that is available, millions of people actually consume less than the minimum. The occurrence of child undernourishment is even higher than under the policy failure scenario in all developing-country regions. Overall, the technology and natural resource management failure scenario results in the worst impact on food security and child malnourishment in the developing world. The progressive policy scenario outlines several of the most crucial positive steps. National governments and the international community must assume a new focus on agricultural growth and rural development, along with increasing their investments in education, social services, and health. Policies to encourage synergistic growth in the nonfarm sectors are also needed to spur broad-based economic growth. Underpinning these strategies and research agendas must be a firm commitment to reducing hunger and improving the welfare of the world's undernourished people." From Authors' Executive Summary
    Keywords: Impact model ,Caloric intake ,Safety nets ,
    Date: 2005
  5. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: Attempt has been made to identify dominant forms and factors for output realization in Bulgarian farms. New Institutional and Transaction Costs Economics framework is used to estimate comparative efficiency of various modes for realization of farm outputs in farms of different type (unregistered, cooperative, agro-firms) and various sizes (small, middle-size, large). Study is based on a large-scale microeconomic data collected through interviews with managers of 0.5% of commercial farms in the country. Big institutional, economic, and behavioral uncertainty combined with high assets specificity and low recurrence of transactions, have blocked formation of agrarian markets in the country. Market has “failed” to organize significant part of inputs supply and outputs realization transactions. However, agrarian agents have developed various private modes to overcome transacting difficulties and to govern their dependent transactions. A great variety of in-farm production and processing, personal contacts, long-term marketing contracts, and interlinked modes etc. have come to existence and they characterize dominant structures for outputs realization in Bulgarian farming today. Major type of farming outputs realization (household consumption and giving to friends and relatives; production in-farm consumption; additional processing in-farm; long-term contract for outside processing; sell) in farms of different types and sizes has been identified and their relative share in brut farm output determined. Product specificity (grain, vegetables, fruits and grape, live animals and meat, milk, others) and its relation to specific organizational choice of outputs realization (member cooperative; other farm, cooperative or firms; retail trade; wholesale trade to store, hotel, restaurant; commodity exchange; wholesale market; in-farm processing; state reserve; direct export) have been identified and microeconomic factors for governance choice discussed. Importance of diverse factors for preferring a particular buyer or mode for realization of farm outputs (lack of alternative buyer; best prices; maximum profit; minimum risk; cheapest way; maximum security; high trust; tradition; frequency of transactions with the same partner) have been specified. Prominence of various transacting problems for realization (lack of buyers; low prices; unstable prices; no price information; no buyer information; buyer is better informed; unreliable partner; not-fulfillment of negotiated terms; controlling and enforcement of contracts; non-business factors etc.) for main farming products and type of farms have been specified. In the same way the significance of chief factors for successful realization (mutual benefits for partners; written contract; oral agreement; third-party assistance; good will of partners; tradition; trust; beneficial for farm prices; lack of competition) have been identified. High marketing costs along with the big enforcement costs of contracts in general, and enormous credit supply costs are the major factors restricting farm enlargement of Bulgarian farms as present stage. Besides, the most important factors for farm development in future relate to improvement of institutional environment (guaranteed marketing, enforcement of Laws and private contracts, macro-economic stability, legislation framework, access to free markets), and own and family experience in farm management.
    Keywords: governing of output realization and marketing; transaction cost economics; transitional farm organization
    JEL: D1 D2 D3 D4
    Date: 2005–11–06
  6. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: The traditional approach for assessing farm sustainability (based on indicators of “productivity”, “profitability”, and “financial dependency”) fails to explain why there exist highly sustainable farms with different levels of “efficiency” such as low productive subsistent and part-time farming, non-for profit and cooperative enterprises, small commercial farms and large agro-corporations, etc. In this paper we adapt the New Institutional and Transaction Costs Economics perspective to agrarian sphere, and suggest a new framework for assessing sustainability of farms and farm structures. Firstly, an analysis is made on various approaches for defining sustainability of agricultural systems: as “an ideology”, as “a set of strategies”, as “the ability to fulfill a set of goals”, and as “ability to continue”. The “problem of sustainability” in the economic model (mainly associated with “negative externalities”, “tragedy of commons”, “jointness of farm production”) is also presented, and the “institutional” solutions of that problem discussed. Second, we prove that analysis of institutions and transacting costs is important for proper understanding the farms sustainability. Institutional environment is the crucial factor, which determines the restrictions and costs of farm activities, and eventually - the level of sustainability of different farm organizations. In the specific institutional setting, agrarian agents use (or develop) a great variety of effective (cost economizing) market and non-market modes for governing of their exchanges. Therefore, studying the farm as a governance (rather than production) structure is the key for understanding the farm efficiency and sustainability. Third, we define sustainability of farm as a state when it manages all transactions in the most economical way – that is the situation when there exist no transaction, which could be carried out with net benefit. When a farm experiences high costs and difficulties meeting institutional restrictions and carrying out transactions, comparing to other feasible modes, it will be unsustainable. That is because there will be strong incentives for exploring the existing potential (adapting to sustainable state) through reduction or enlargement of farm size, or via reorganization or liquidation of the farm. Thus the farm potential for adaptation to changing (market, institutional, technological etc.) environment is to be the main indicator for farm sustainability. Furthermore, the most effective form for organization of farm transactions will depend on individuals’ characteristics (preferences, entrepreneurial abilities, risk aversion etc.) and specific attributes of each transaction (uncertainty, frequency, assets specificity, and appropriability). Consequently, effective farms of different type and size could persist (sustain) in agriculture. Finally, we develop a principle matrix with the effective modes for governing of agrarian sustainability. Discrete structural analysis is used to define the transactions for which market, contract, and integral forms are efficient (sustainable). We also determine the situation(s), where there is strong need for a third-party public involvement in agrarian sphere - that is for transactions with low appropriablity, and high uncertainty and asset specificity. In later case, there are no sustainable market and private modes to organize such transactions effectively (e.g. supply of environmental goods). Next, we specify the spectrum of possible public forms for intervention in market and private transactions - assistance, regulation, hybrid and in-house organization, international cooperation, property rights and institutional modernization. The comparative efficiency of feasible modes for public involvement is to be assessed taking into account the overall costs and benefits. Sustainable agrarian development is compromised when both market and private forms fails, and no effective public intervention takes place.
    Keywords: assessing farm sustainability, governing of agrarian and farm sustainability, new institutional and transaction costs economics
    JEL: D1 D2 D3 D4
    Date: 2005–11–06
  7. By: David Zilberman (University of California at Berkeley); Leslie Lipper (Agricultural and Development Economics Division, Food and Agriculture Organization); Nancy McCarthy (International Food Policy Research Institute, IFPRI)
    Abstract: The impact of payment for environmental services (PES) on poverty varies. Generally, PES is good for landowners and may negatively affect consumers if food demand is inelastic. Impacts also depend on the correlation between poverty and environmental amenities. If the richer farmers also provide the best environmental services (ES), then the poor farmers may lose. If there is negative correlation between ES and productivity, then the poorer landowners may gain from ES. The distribution of land matters. If smallholders depend on earnings from work on larger farms, then PES may affect them negatively. Program specifications also matter. Working land programs may have better distributional effects then PES for land diversion.
    Keywords: Payments for environmental services, poverty, conservation, land use change, market-based mechanisms.
    JEL: Q0 Q15 Q24 O13
    Date: 2006
  8. By: Mullen, Kathleen; Orden, David; Gulati, Ashok
    Abstract: "Since the early 1990s, India has undergone substantial economic policy reform and economic growth. Though reforms in agricultural policy have lagged those in other sectors, they have nonetheless created a somewhat more open economic orientation. In this study, we evaluate the protection and support versus disprotection of agriculture in India. Our methodology involves examining market price support (MPS) for eleven crops, the expenditures on input subsidies benefiting farmers (for fertilizer, electricity and irrigation), and product-specific and total producer support estimates (PSEs) over the period 1985-2002. We draw on the extensive price-comparison and subsidy-measurement data sets and analysis developed earlier by Gulati and his co-authors, often using disaggregated analysis for representative surplus and deficit states. This allows us to explore how key cost adjustments impact the results. Overall, our results indicate that support for agriculture in India has been counter-cyclical. Support for agriculture has been rising when world prices are low (as in the mid 1980s and 1998-2002) and falling when world prices are high (as in the early and mid 1990s). Our results demonstrate the increased importance of budgetary payments for input subsidies in agriculture in recent years. Yet, in the aggregate for both price support and budgetary expenditures over the period 1985-2002 the counter-cyclical dimension of agricultural policy dominates a clear trend of movement from disprotection towards protection. Using different variants of MPS and PSE measurment we have extended earlier analysis to demonstrate the impact of key assumptions on the calculations. These assumptions we argue are important to consider. For example, in the standard approach, the MPS for the covered commodities is “scaled up” based on the share of the covered commodities in the total value of production. If the commodity coverage is less than complete, as is often the case, the scaling up procedure leads to a total MPS of greater absolute value than the MPS for the covered commodities. This can result in PSEs of different sign than the non-scaled up version but is inappropriate unless market price support for the commodities not covered is similar to that of the covered commodities. Furthermore, we find that the standard procedure of computing the MPS through a comparison of the domestic price to an adjusted reference price based on observed imports or exports can be problematic. This happens when trade volumes are relatively small. In such a scenario a reference price based on observed imports or exports can lead to misleading conclusions. To address the reference price issue, we follow Byerlee and Morris (1993). Essentially the approach adopted is to compute the level of protection or disprotection based on a counterfactual reference price chosen on economic criteria i.e. the adjusted reference price that would exist in the country if the policy interventions were removed. The relevant price can either be the autarky equilibrium price or the import or export adjusted reference price depending on the relationship among these prices. We apply this modified procedure for six crops (wheat, rice, corn, sorghum, sugar and groundnuts). The choice of the crops is dictated by the fact that India has been near self-sufficiency and there have been changes in the direction of trade over the period of analysis. The magnitudes of estimated support for agriculture obtained in this paper are important for several reasons. The estimates confirm that high levels of subsidies were required for India to export wheat or rice in recent years, a conclusion reached by several other studies. However, we report less disprotection of Indian agriculture in the 1990s than in earlier studies. Partly this difference is explained by the modified procedure for choice of a reference price. A large component of this difference can be accounted for by whether or not the scaling up procedure is invoked. There are also fertile areas for future research. Estimates of adjustment costs used in domestic-to-border price comparisons, such as transportation and processing costs or marketing margins, are crucial variables in the analysis and merit being re-examined and further updated. Resolving what are the most reasonable assumptions about reference prices, or extending the analysis to additional crops and livestock to reduce uncertainty in future assessments will also contribute to fuller understanding of the net stance of policy toward agriculture and how it has evolved over time" Authors' Abstract
    Keywords: South Asia ,South Asia and Central Asia ,Agricultural policy ,Producer Support Estimates (PSEs) ,Agricultural support ,Agricultural production ,Scaling up ,
    Date: 2005
  9. By: Adriana Ignaciuk
    Abstract: Biomass as a source of energy has several advantages over fossil fuels. It delivers energy at low net CO2 emission levels and it contributes to sustaining future energy supplies. However, an often-heard concern is that large-scale biomass plantations might increase pressure on the productive land and might cause a substantial increase of food prices. Johansson and Azar (2004) predict that due to rigid CO2 policy the price of agricultural goods increase substantially. McCarl and Schneider (2001) analyses the impact of carbon price on food and biomass production and they conclude that with a carbon price of 500$/MTCE, US crop prices almost triple. If we can exploit the multi functionality properties of biomass plantation, such as bioremediation, they can contribute to environmental policy by reducing the competition between biomass and agricultural production. In this paper we deal with the trade-off between agricultural and biomass production when such synergies are explicitly taken into account. To assess the impact of environmental policies on greenhouse gas emissions, land use allocation, sectoral production and consumption levels and prices of land, food, electricity and other commodities we present an applied general equilibrium (AGE) model with special attention to biomass and multi-product crops. The model describes the entire economy, with explicit detail in the representation of production of traditional agricultural and biomass crops. The model is an extended version of the model described in Ignaciuk et al. (2004). The model distinguishes 35 sectors, including 6 agricultural and biomass sectors. Moreover, the bioelectricity sector is explicitly described. We include three primary production factors: labor, capital and land. Three land classes are identified to capture differences in productivity from different land types. A representative consumer maximizes utility under the condition that expenditures on consumption goods do not exceed income. Utility is represented by a nested constant elasticity of substitution (CES) function, in order to allow for substitution possibilities between different consumption goods, such as between conventional electricity and bioelectricity. Producers maximize profits subject to the available production technologies. Production technologies are represented by six-level nested CES functions, where also emissions (emission permits) from production processes are incooperated. The emissions of major greenhouse gases are calculated; namely CO2, N2O and CH4. A government sector collects taxes, distributes subsidies and consumes public goods; environmental policy is implemented by reducing the number of emission permits the government auctions. This way of modeling environmental policy ensures that a cost-effective allocation is achieved. The interactions between the various production sectors are relevant, as the agricultural and energy sectors have strong links with the rest of the economy. An economy-wide model, such as the AGE-framework provides, allows us to take these interlinkages fully into account. Moreover, the indirect impacts of environmental policies, that are often ignored but can be highly relevant (cf. Dellink 2005) are incorporated in this way, ensuring a consistent assessment of the economic costs of environmental policy. We calibrate the AGE model using data for Poland for 1997. Poland provides a relevant case as it has a high potential for biomass production, and has a large agricultural sector (Ignaciuk et al.2005). In the empirical application, we focus on bioremediation characteristics of willow plantations and on biodiversity support of forestry. Data are taken from Statistics Poland (GUS 2002) and the GTAP database (Rutherford & Paltsev 2000). The preliminary results show that bioremediation characteristics of willow can substantially increase the potential for bioenergy, thanks to its potential of growing on marginal land. Thus, the costs of climate policy can be substantially reduced and the policy goals set for bioenergy use can be achieved with less effort. However, at current prices, willow and forestry are not economically interesting, and hence stringent environmental policies are needed to ensure that these opportunities are reaped.
    Date: 2005–08
  10. By: Lemeilleur, S.; Codron, J.M.; Fares, M.
    Abstract: Formal credit institutions in Cambodia have largely failed to provide access to farm credit to small and medium-scale paddy producers. The paper describes interlinked transactions between commercial rice millers and paddy producers in the paddy market that facilitate the provision of credit. Moreover, interlinked transactions are also used as an incentive device for producers who can only be imperfectly monitored. This kind of interlinked transaction, which tends to be dominant, may emerge as the best governance structure to minimize production and transaction costs. However, we show that in the context of producers' vulnerability to weather damage to crops, perverse risks may also cause indebtedness among producers. Thus, interlocking transactions could lead to unequal relations of economic power, often at the cost of delaying agrarian growth. These dependency relationships may explain, in part, why development institutions fail to promote producers' organizations with rice marketing capabilities. ...French Abstract : Au Cambodge, la défaillance du marché financier rural reste un des freins déterminants au développement des petites et moyennes exploitations agricoles. Cet article décrit les contratsliés entre riziers commerciaux et producteurs de riz paddy facilitant l'octroi de crédit pour ces derniers. Par ailleurs, les contrats-liés sont utilisés par le rizier comme mécanisme d'incitation à l'effort des producteurs, qui ne peut être qu'imparfaitement contrôlé. Les contrats-liés qui tendent à être la forme dominante dans les relations entre riziers et producteurs, semble émerger comme meilleure structure de gouvernance pour réduire les coûts de production et de transaction. Cependant, nous montrons que dans un contexte de forte vulnérabilité des producteurs aux aléas climatiques, le risque d'endettement peut être important pour de nombreux producteurs. Ainsi, les contrats-liés peuvent mener à des relations de pouvoir entre acteurs, générant un manque l'efficacité globale sur le marché du riz. Ces rapports de dépendance pourraient alors expliquer, en partie, les difficultés rencontrées par les institutions de développement dans la promotion des organisations de producteurs à vocation économique.
    JEL: L14 L22 Q13
    Date: 2006
  11. By: Rolf Maier
    Abstract: This paper analyzes empirically the impact of trade policy and sector specific openness on pro-poor growth in a cross-country approach to answer the question, whether the poorest 20 and 20 to 40 percent benefit from trade openness. To capture this issue, we estimate the distribution effect of eight different openness indicators, six adjusted trade sector indicators (agricultural raw materials exports and imports, food exports and imports, manufactures exports and imports) and two tariff indicators (export duties and imports duties). In addition, we estimate the total effect, i.e. the distribution and growth effect, to analyze potential trade-offs between the impact of trade liberalization on poverty via overall economic growth and distribution. To test the poverty effects, we collect an irregular and unbalanced panel of time-series cross-country data on the first and second quintile share in 72 countries for the period 1971 to 1999 and apply two econometric specifications, a growth equation and a system GMM equation. We estimate the poverty effects of trade policy for all countries and, separately, for developing/transitional and industrial countries due to considerable differences in economic structure. Finally, we estimate poverty effects of trade liberalization with respect to the level of the countries’ development. Combining empirical findings of the system GMM estimation for both the distribution and total effect, estimation results suggest the importance of sector specific trade policy for the poorest 20 and 20 to 40 percent. First, liberalization in agricultural raw material exports is very important for the poorest 40 percent of low income developing countries due to both the distribution and total effect. In addition, liberalizing imports in agricultural raw materals is highly positively related to the mean income of the poor without changing the distribution. Second, trade reforms in food exports affect negatively the mean income of the poorest 40 percent in low income developing countries through the growth effect. However, higher food imports are associated with positive distribution effects, but without total effects on the poorest 20 percent in low income developing countries. Third, promotion of manufactures exports lead to a positive total effect on the poorest 40 percent in developing countries via the growth effect, while trade reforms in manufactures imports are never relevant. Finally, reduced export and import duties affect positively the mean income of the poorest 40 percent in low income developing countries, an effect primarily driven by the growth effect. Findings for agriculture exports, food exports, export and import duties, however, are only relevant if we exploit information on both the cross-country and within-country variation of the income of the poor in a system GMM estimator. In addition, results of the growth equation suggest positive total effects of agriculture imports on the poorest 20 and 20 to 40 percent in development countries driven by the growth effect alone. Thus, empirical findings suggest the following policy recommendations with respect to poverty-reducing trade reforms in low-income developing countries. While results are not always consistent between the growth equation and the system GMM estimation, liberalization of agricultural raw material exports and imports seems to be the most promising approach. On the other hand, liberalization in food markets and manufactures imports are not associated with poverty alleviation in low- income developing countries. Finally, a promotion of manufactures exports and a reduction of export and import duties seem to increase mean income of the poorest 40 percent in low-income developing countries only via the growth effect.
    Keywords: Pro-Poor Growth, Trade Policy
    JEL: F1 F2
    Date: 2005–04–21
  12. By: Georges Allaert; Hans Leinfelder; Peter Vanden Abeele; David Verhoestraete
    Abstract: The Centre for Mobility and Physical Planning of the Ghent University coordinates a two-year research project about the preconditions for sustainable land use by agriculture in (the Flemish) urbanising network society. The project questions the traditional legitimacy of agriculture in planning to claim the majority of the surface, merely because of economical reasons. If agriculture wants to have a raison d’être in urbanised and urbanising society, it will have to meet the quality demands of network society which are more than economical demands. The degree in which agriculture is capable in fulfilling these needs, will be decisive for the spatial development perspectives for agriculture. Questioning the traditional legitimacy of agriculture in planning is also questioning the actual planning discourse that has been dominating policy for the last three decades, not only in Belgium but in the most of North-Western Europe. This dominant discourse considers city and countryside as antipoles and is still translated in current planning initiatives that strengthen compact cities and restrict new developments in the countryside. This discourse is no longer tenable within the concept of network society, especially in the densely populated and fragmentarily urbanised Flemish region in Belgium where numerous urban activities and functions are silently and autonomously taking over the countryside. The research tries to evaluate the spatial development perspectives for agriculture of three alternative planning discourses about the spatial relation between city and countryside through design-oriented research. These alternative discourses try to meet the characteristics of network society in a different way than the dominant discourse: the first one considers city and countryside as networks of activities, the second one sees them as systems of places with an identity and the last one defines the ecosystem as the common layer of city and countryside. As the design-oriented research is evolving in a study area around Kortrijk and Roeselare in the Western part of Flanders, it becomes clear that each of these three alternative discourses is confronted with water (management) as a decisive factor in the planning of the land use of agriculture in relation to urban activities in the countryside. This is of course obvious for the ecosystem discourse as water is one of the driving forces in the ecosystem. But also in the network of activities discourse the exhaustion of the ground water supply seems to be one of the main frustrations, to be solved through planning, between the international network of activities of the farming industry and the local/regional network of villages and agriculture. Finally, water seems to be an important factor in defining and planning the identity of places in the system of places discourse. The paper will primarily focus on the theoretical background of dominant and alternative planning discourses about city and countryside. Consequently it will summarise the results of the water related design-oriented planning research on and the spatial development perspectives for agriculture of the three alternative planning discourses in the study area.
    Date: 2005–08
  13. By: Hrabrin Bachev (Institute of Agricultural Economics, Sofia, Bulgaria)
    Abstract: The goal of this paper is to incorporate achievements of the New Institutional and Transaction Costs Economics to analysis of efficiency of agrarian organizations in transitional economies. That modern framework for analysis of agrarian organizations is based on their role to govern transactions between individual agents. Since governing (coordination, organization) of transactions is associated with significant costs (for finding best prices and partners, for negotiation and contracting, for monitoring and enforcement of contract terms, for adjustment and re-negotiation according to changed conditions of exchange, for dispute resolutions etc.), the economic efficiency of agrarian organizations has to assess not only their capacity to minimize the production costs, but their potential to economize transacting costs as well. Initially, main kinds of transactions of the managers of agrarian transactions (farms entrepreneurs) are clarified as land, labor, service, inputs, and finance supply; marketing; and collective actions. After that, the alternative market, non-market, and mixed modes for organization of different types of agrarian transitions are identified. Next, various types of costs associated with each form of transacting are determined. And then, the comparative efficiency of different governance structures is estimated according to (minimum) transacting costs criteria. One direction for evaluation of comparative efficiency of governing structures is based on direct assessment of items of costs for transaction in different organizations. However, that manner is often restricted since: difficulties (or impossibility) to measure absolute level of transaction costs; opposite dynamics of different items of costs in various organizations; great use of complex (and interlinked) rather than pure modes in transitional agriculture; and not existence (missing) of alternative form for organization (the base for comparison). Another direction is through comparative structural (qualitative) analysis of alternative governing forms. Firstly, critical factors of transactions in particular institutional environment are identified. These factors affect transaction costs variation, and they are associated: with behavioral characteristic of agrarian agents (bounded rationality, tendency for opportunism, building of reputation, risk aversion, level of trusts); and with economic dimensions of individual transactions (frequency, uncertainty, assets specificity and appropriability). Secondly, assessment is made on effective potential of alternative organizational modes to: minimize bounded rationality of agrarian agents and uncertainty associated with transacting; to appropriate and protect private investments from possible opportunism; to recover long-term investments for organizational development through high recurrence of transactions between same agents; to exploit economy of size and scale on specific for relationship with a particular partner capital etc. Third, principal matrix of generic organizational modes is build for effective governance of transactions with different combination of critical dimensions: free market mode if effective to carry out transactions with high appropriability and low assets specificity; the special contract form is appropriate for transactions with high frequency, and increased uncertainty and assets specificity; the internal integration can manage effectively repeated transactions with high capital dependency and big uncertainty; the hybrid and public modes are the most effective forms for occasional transactions with low appropriability and high assets specificity. Finally, effective horizontal and vertical boundaries of every specific form within each generic modes could be determined through comparison of their potential to explore economy of size (scale) on specific or (and) specialized assets, and their comparative efficiency to minimize bounded rationality and to control opportunism of counterparts.
    Keywords: agrarian governance, efficiency of agrarian organizations, new institutional and transaction costs economics
    JEL: D1 D2 D3 D4
    Date: 2005–11–06
  14. By: Morris Sebastian
    Abstract: In this paper we discuss the stylised problems relating to water and irrigation in India and argue that most of the inefficiencies, misuse and environmental damage have their roots in the mispricing of water and electricity. Since the only kind of subsidies thus far used are price based input subsidies they end up distorting the allocative prices, from which the other distortions follow. The problems of the sector can be overcome by changing the method of subsidisation. Converting price based or tariff subsidies to direct subsidies and endowments with improved tradability would solve most of the problems in the water and electricity sectors. Administrative and managerial initiatives by themselves would not succeed without this crucial tariff and subsidy reform. Such reform would also result in political capital for its initiators, and should make private and public financing of water (and electricity) projects possible. The issues related to pricing, water rights, subsidies and financing are deeply interlinked, and the correct pricing would necessarily have to recognise the financing dimension. Water being a scarce commodity with major composition and coordination economies in its use, its pricing cannot be discussed without a consideration of the rights (implicit or otherwise). This study, unlike many previous diagnostic studies, has been led by the need to find solutions to a fast deteriorating situation: rising implicit subsidies, movement away from optimal use in a major way, huge distortions and resulting social costs in the use and misuse of water, and as much as 30% of the irrigation water supplied being wasted. The environmental effects of such inappropriate use and waste increase by the day. Our approach to the problem calls for a strategic shift in so far as we argue that reform is not possible if the present approach to work around major policy and design infirmities rather than remove them in the first place continues. This is because the distortions have been so deep rooted as to have fed back into the governance and institutional structure of water management in the country. We also argue for solutions that are incentive compatible in the sense that the designs for pricing & regulation and financing (within the appropriate policy and rights framework) are internally consistent and would work without depending continually upon political commitment, administrative initiatives and managerial energies. Incentive compatible policies are those which by design meet the criteria that the actors, civil servants, proposed water companies and cooperatives, electricity companies, farmers have the correct incentives to do what is right for efficient production, management, allocation and consumption of the resource without administrative direction or urging or demanding the presence of persons with exceptional morals, or leadership qualities. Key elements of our recommendations are: The right to water of a state to the rivers and other water bodies should include the right to trade i.e. to sell the water. This would be consistent with the fact that the bulk of he water is for commercial use today. A formal, perhaps constitutional basis of sharing the waters of interstate rivers rather than national level optimal use being pursued weakly through agreements as is the case today is important. The irrigation sector at all levels is opened to the private sector through frameworks for various kinds of private finance initiatives including the DBF /DBFO type initiatives. Rather than cost plus, it would be far more useful to institute regulation which is incentive in approach and price cap in form, though uniform caps across the country would not be possible nor desirable. Price caps could be the same across fairly large regions. All subsidies whether for electricity or water would have to be direct subsidies delivered to the farmer. An identification exercise carried out once that allows the endowments of a farmer to be fixed, so that he can be issued electricity coupons and water coupons periodically, is necessary. This ensures the political commitment of the farmer since now he has nothing to lose but a lot to gain. Without such commitment and certainly with their hostility as the current agenda to eliminate or reduce subsidies implies, no reform is possible. With all subsidies going direct, there need not be restraints on commercial behaviour and orientation of all participants in the market. The productive organisations – bulk water companies, retail companies and distributors including (WUAs), and farmers can all relate to the regulated bulk, and retail market prices. Current subsidies in irrigation are converted to endowments in units of water and provided to the farmer in the form of coupons with which (as also with cash) he can buy water, and even sell the same subject to certain restraints. Thereby prices are allowed to perform their function of ensuring allocative and use efficiency. Since water supplies may be limited (because of natural factors, and because of limited existing capacity to produce /store) bulk water rates ought to be regulated, with only small opportunity for water companies (bulk and distribution) to gain out of the (high) retail water market prices. Regulated prices could be long run marginal cost (LRMC), in which case the difference between the commercial viability prices and the LRMC prices is made up for the private /commercial bulk water producer through annuities in an appropriate private finance initiative (PFI) deal. The benefit of the difference between the regulated retail prices at which water is supplied to the farmer and the retail water market prices in the command area/ayacut is to the account of the farmer. Since the farmer is able to internalise this benefit with reference to the price, there are strong incentives for judicious use, and optimal trade. In water scare regions it would restore and enhance the incentives for even investments in water saving technologies. A little of the same benefits is designed to be internalised by the water distribution entity so that it has strong incentives to save water in distribution, recover losses, and make investments for repairs, rehabilitation and augmentation Tradability across an entire command is a desirable objective, which can be introduced as experience is gained of the system. Cross command tradability should also slowly emerge subject to certain safeguards against the monopolisation of access rights to water. Water distribution companies are ideally structured as WUAs i.e., cooperatives but with some allowed asymmetry in shareholding. But they ought not to be limited to WUAs or even to farmers’ companies. Bidding for distribution business should be open to entirely private companies too, so that the process of decentralised distribution does not necessarily have to be constrained by the ‘free rider’ problem in cooperation. For entirely new projects requiring construction of new distribution assets, the access rights can be sold at prefixed prices/market prices but strictly limited to farmers with operational/own holdings of land in the command area/ayacut, to raise the capital to construct the distribution system. This can be done separately for each of the distribution areas, since the bid prices are likely to vary depending upon such factors as the alternative supplies including from ground water available. Such purchase of the rights to water would lead to much flow of finance into the sector, and in a way that is functional and entirely incentive compatible. Banks and rural development finance institutions without any subsidy could then support the participation of farmers in the equity of distribution companies. Tanks systems would also require a certain recasting with formally defined rights and prices for use of ground water and surface irrigation. The need here is to minimise the free-rider problem that is inherently a barrier in the management and judicious use of tank irrigation (a common resource in many ways). Herein the key to reform is to lead the system to an explicit relative valuation of the direct and indirect output of the tank (canal water and ground water) through bids restricted to farmers from within the ayacut. A prior fixation of the shares of each farmer in the ‘tank’ business that includes already existing use of wells is the key. Tradability among members of such ‘rights water’ would ensure its judicious use, and the expansion /savings in supplies would follow from the large profits that farmer would make in avoiding leakages and siltation.
    Keywords: India, Irrigation, Electricity, Reform, Subsidy, distortion, Privatisation, commercialisation, Water-users-Association, water-rights, pricing, financing, public-private-partnership
    JEL: H4
    Date: 2005–11–22
  15. By: Roger Bivand; Rolf Brunstad
    Abstract: The work discussed in Bivand and Brunstad (2003) was an attempt to throw light on apparent variability in regional convergence in relation to agriculture as a sector subject to powerful political measures, in Western Europe, 1989 1999. We tried to explore the possibility that some of the observed specification issues in current results are rooted in neglecting agricultural policy interventions, within the limitations imposed by data available. We also attempted to use this as a case setting for evaluating the appropriateness of geographically weighted regression (GWR) as a technique for assessing coef- ficient variability, over and above for instance country dummies, but possibly reflecting missing variables or other specification problems. The present study takes up a number of points made in conclusion in that paper. Since it is possible that the non-stationarity found there is related to further missing variables, including the inadequacy of the way in which agricultural subsidies are represented, we attempt to replace the agriculture variables with better estimates of producer subsidy equivalents for the base year. We also look at ways of handling changes in agricultural policy regime occurring between years and T. This raises the further challenge of looking at both spatial and temporal dimensions at the same time, which we will discuss, but are not likely to resolve satisfactorily. On the technical side, the tests on GWR estimates also need to be more firmly established. The GWR results also need to be tested for spatial autocorrelation, and re-worked in an adaptive weighting framework, although GWR does already involve a spatial weighting of the observations themselves. The paper is therefore also an account of the development of software contributed to the R project (R Development Core Team, 2004) as packages, in particular the spdep package for spatial econometrics, and the spgwr package for GWR fitting. In particular, specific issues regarding the handling of the Jacobian in fitting spatial simultaneous autoregressive (SAR) models, and in interpreting GWR output will be discussed. These will be set in the context of on-going work on semi-parametric spatial filtering, which it is hoped to add to spdep following contributions by Michael Tiefelsdorf, so that the weaknesses and strengths of alternative approaches can be compared. Concentrating on implementations in R is justified by the preliminary nature of many of these methods requiring open source and replicable statistical research approaches, so that others can, if they wish, see how results were calculated. One such technical issue is the representation of neighbours in the various approaches, and of the impact of symmetry requirements in conditional autoregressive (CAR) models typically used in MCMC estimation using Open- BUGS and elsewhere. Indeed, in many SAR models, symmetry is also required, or at least underlying symmetry, with the weights matrix in the rowstandardised weighting scheme typically being similar to a symmetric matrix. Using the Western European regional growth data augmented with agricultural policy variables, we will try to explore how far some as-yet unresolved technical questions impede progress with substantive interpretation. We will also try to show how these questions may be handled in other software settings, and how data can be moved between software platforms for analysis. In conclusion, the paper has two threads, one focussing on the analysis of the relationships between regional growth and agricultural policy, generating models needing testing, while the other attempts to meet the software demands generated in the first thread, and to incorporate on-going research in spatial data-analytic methods to respond adequately to the potential importance of the substantive research question.
    Date: 2005–08
  16. By: Giovanis Elephtherios
    Abstract: The rural sector constitutes a exceptionally important department of Greek economy, so much for his contribution in the growth of country, after it can and allocates comparative advantage in certain rural products, which are known as, Mediterranean, but also because of his big attendance in the employment and in the income, that nevertheless the continuous reduction of corresponding attendance of employment and consequently and continuously decreased mean of rate of attendance of rural sector in the employment, that is observed in the other countries of E. E., Greece continues him exceeding. Undeniably, a critical point is the importance and the enormous importance that has the rural sector in certain regions of country, so much with regard to the employment and the additionally of income, what the withholding of rural population in this regions amining at the protection of environment and the maintenance the cultural and natural heritage. The aim of this work is the analyse developments of the most basic ethnic sizes of Greek rural economy and to point out the most basic problems that this sector faces. The work begins with a short historical retrospection and then follows the first chapter. they are presented: · the course of crude domestic rural product in interrelation so much with his rate of attendance in G. D. P., what concerning the crude domestic product of other sectors (secondary and tertiary), · the development of basic productive factors of rural sector, the development of productivity of labour capital and territory, rural income and the main characteristics of Greek rural population. In the second chapter they will be analysed the elasticities of supply and demand, as for the price of main rural products and as for the income. In the third chapter we will see the interrelation of employment for the production sponges In the fourth chapter we will examine the elasticity of demand for fertilizers. In chapter fifth we present the Cobb-Douglas model for the control if they exist declining or serial or constant output in rural sector. In chapter sixth we will see the relation between rural consumption and rural income, the marginal propensity to consumption in rural sector, and forecasting. In chapter seventh we present a macroeconomic model in closed economy. This project was written as a dissertation in the fourth and the last year of my degree of Economic Science in University of Thessaly. This paper is only a part of the authentic dissertation. I tried to present only the parts which relating with econometrics .Of course, the analysis are adapted accordingly with the elements that were found, at that they do not cover in all the cases of study, the time period 1950-1998. the analysis it becomes accordingly with the elements that are found in availability, so much as for the effort of search in the internet, what as for the availability of books and elements in the library of University of Thessaly. The methodology that is followed is the statistical and econometric treatment of data Reason, for this work constituted the sensitisation to the rural population, because it is that unique social layer that maintains dance floor the traditions of our population, as moreover maintains the corresponding peasantry of other countries of Europe, which can contribute decisive in the maintenance of our cultural heritage and in the protection of environment, as well as in the distribution of our moral values, without however this means that it constitutes also obstacle to the development of our culture, that if is also this. If we contemplate better we will see that the rural sector constitutes the base of economy and our culture and this will be realised diachronically. It should it is still reported that the ten countries that emanate from the former real socialism and that entered already in the EU hardly recently possess important rate of employment in the rural sector and with important crude rural product. With few reasons work it constitutes motive to the future students not neglect the importance of rural sector and they must realise the importance that it has in our life and they should deal inquiringly with this.
    Keywords: basic ecocometrics Greek Rural Sector
    JEL: C
    Date: 2005–01–16
  17. By: Maria Julia Seixas; João Pedro Nunes; Pedro Lourenço; Fernando Lobo; Paulo Condado
    Abstract: Future land use configurations provide valuable knowledge for policy makers and economic agents, especially under expected environmental changes such as decreasing rainfall or increasing temperatures, or scenarios of policy guidance such as carbon sequestration enforcement. In this paper, modelling land use change is designed as an optimization problem in which landscapes (land uses) are generated through the use of genetic algorithms (GA), according to an objective function (e.g. minimization of soil erosion, or maximization of carbon sequestration), and a set of local restrictions (e.g. soil depth, water availability, or landscape structure). GAs are search and optimization procedures based on the mechanics of natural selection and genetics. The GA starts with a population of random individuals, each corresponding to a particular candidate solution to the problem. The best solutions are propagated; they are mated with each other and originate “offspring solutions” which randomly combine the characteristics of each “parent”. The repeated application of these operations leads to a dynamic system that emulates the evolutionary mechanisms that occur in nature. The fittest individuals survive and propagate their traits to future generations, while unfit individuals have a tendency to die and become extinct (Goldberg, 1989). Applications of GA to land use planning have been experimented (Brookes, 2001, Ducheyne et al, 2001). However, long-term planning with a time-span component has not yet been addressed. GeneticLand, the GA for land use generation, works on a region represented by a bi-dimensional array of cells. For each cell, there is a number of possible land uses (U1, U2, ..., Un). The task of the GA is to search for an optimal assignment of these land uses to the cells, evolving the landscape patterns that are most suitable for satisfying the objective function, for a certain time period (e.g. 50 years in the future). GeneticLand develops under a multi-objective function: (i) Minimization of soil erosion – each solution is validated by applying the USLE, with the best solution being the one that minimizes the landscape soil erosion value; (ii) Maximization of carbon sequestration – each solution is validated by applying atmospheric CO2 carbon uptake estimates, with the best solution being the one that maximizes the landscape carbon uptake; and (iii) Maximization of the landscape economic value – each solution is validated by applying an economic value (derived from expert judgment), with the best solution being the one that maximizes the landscape economic value. As an optimization problem, not all possible land use assignments are feasible. GeneticLand considers two sets of restrictions that must be met: (i) physical constraints (soil type suitability, slope, rainfall-evapotranspiration ratio, and a soil wetness index) and (ii) landscape ecology restrictions at several levels (minimum patch area, land use adjacency index and landscape contagion index). The former assures physical feasibility and the latter the spatial coherence of the landscape. The physical and landscape restrictions were derived from the analysis of past events based on a time series of Landsat images (1985-2003), in order to identify the drivers of land use change and structure. Since the problem has multiple objectives, the GA integrates multi-objective extensions allowing it to evolve a set of non-dominated solutions. An evolutive type algorithm – Evolutive strategy (1+1) – is used, due to the need to accommodate the very large solution space. Current applications have about 1000 decision variables, while the problem analysed by GeneticLand has almost 111000, generated by a landscape with 333*333 discrete pixels. GeneticLand is developed and validated for a Mediterranean type landscape located in southern Portugal. Future climate triggers, such as the increase of intense rainfall episodes, is accommodated to simulate climate change . This paper presents: (1) the formulation of land use modelling as an optimization problem; (2) the formulation of the GA for the explicit spatial domain, (3) the land use constraints derived for a Mediterranean landscape, (4) the results illustrating conflicting objectives, and (5) limitations encountered.
    Date: 2005–08
  18. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Kataria, Mitesh (Department of Economics, Swedish University of Agricultural Sciences)
    Abstract: The yellow floating heart is a water weed causing nuisance problems in Swedish watercourses. An economic analysis of this is required where various management options are considered. The benefits of a management program are to a large extent recreational. Using a choice experiment we estimate the benefits of a weed management program and perform a cost-benefit analysis of different management programs. In order to be able to distinguish between those who have a demand for a program from those who do not, we introduce a way to distinguish demanders from non-demanders in the choice experiments. The advantage of our suggested approach is that we can more clearly distinguish between conditional and unconditional willingness to pay. In the empirical study we find that a share of the respondents are non-demanders. The demander willingness to pay still justifies cutting the weed in certain places in the lake, given that we use a simple cost-benefit rule. <p>
    Keywords: Choice experiments; invasive species; non-demanders; bivariate probit
    JEL: Q25 Q26 Q51
    Date: 2006–05–30
  19. By: Esbjerg, Lars (The MAPP Centre, Aarhus School of Business); Grunert, Klaus G. (The MAPP Centre, Aarhus School of Business); Bech-Larsen, Tino (The MAPP Centre, Aarhus School of Business); Juhl, Hans Jørn (The MAPP Centre, Aarhus School of Business); Brunsø, Karen (The MAPP Centre, Aarhus School of Business)
    Abstract: Food retailers present consumers with a complex market offering. They offer consumers an assortment of products sourced from numerous suppliers, along with various services within a retailer-controlled environment (Burt & Sparks 2002). Food retailers aim to offer an assortment of products and perform a variety of activities and services, which provide added value in the eyes of consumers (Burt 2000). In this connection, branding is becoming increasingly important, as food retailers develop their own brands within and across product categories. Many retailers are attempting to cultivate an overall brand identity in order to protect and identify their market offering (Burt & Sparks 2002). The assortment of products food retailers offer typically includes manufacturer brands, re-tailer brands and generic or unbranded products. In recent years, increasing competition in food retailing has made food retailers focus on whether they offer the "right" assort-ment to consumers. Under headings such as efficient consumer response (ECR) and cate-gory management (CM), retailers have been readjusting their assortments, delisting many brands that were deemed to be under-performing and including retailer branded products in an attempt to differentiate themselves by offering goods only available in their stores. Despite the importance of branding to retailers, the branding literature has focused on how manufacturers develop and maintain strong brands. Relatively little work has been done in the area of retail brands and even less about the interaction between retailer brands and manufacturer brands. In contrast, this paper develops a concept of retailer brand architecture, which captures that retailers typically offer an assortment of manu-facturer brands, retailer brands and generic products. In doing so we adapt the concept of brand architecture to a retail context. The concept of 'brand architecture', as originally developed by (Aaker & Joachimsthaler 2002), describes how the different brands used to market a range of products from the same manufacturer are related. The concept of brand architecture is based on the assumption that brands are not evaluated in isolation, but are placed in and evaluated within a broader context. This assumption is also important in a retail context. Consumers do not look at an isolated product or brand on the shelf. Their evaluation of the individual brand depends on the context; for instance, what other products are offered in the product category and in the retail outlet, previous experiences with the product or other products from the same manufacturer, as well as previous experiences with the retailer in question. In this paper, we take the concept of brand architecture and apply it to food retailers, con-ceptualising the brand architectures of food retailers as the portfolio of brands (gene-ric, retailer and manufacturer brands), which are included in the assortment of a retail concept (ie, a retail chain). In addition to developing a concept of 'retailer brand archi-tecture', we use this concept to investigate the brand architecture of a number of European food retailers in order to determine similarities and differences in brand architecture strategies. The paper is structured as follows: firstly, the concept of brand archi-tecture is presented. Secondly, the concept of brand architecture is applied to a retail setting and a number of other concepts important for understanding the brand architecture strategies of food retailers are introduced and discussed. Thirdly, the methodology used to investigate the brand architectures of European food retailers is discussed. Then, the findings from a shopping trip across Europe are presented. Finally, a discussion of the findings is provided and it is briefly considered how the findings of this study were used as input for a study of consumer perceptions of the brand architectures of food retailers. This subsequent study investigated whether consumers notice differences between the brand architectures of food retailers and how these are evaluated
    Keywords: No keywords;
    Date: 2005–09–02
  20. By: Patrizia Riganti; Anna Alberini; Alberto Longo
    Abstract: This paper discusses the results of a conjoint analysis study developed to assess alternative land uses for an important part of the city of Venice: its Arsenal. Aim of the study is to illustrate the potential of stated preferences techniques for placing a value on redevelopment and reuse alternatives for an underutilized site with high historical, cultural and architectural significance. Very few studies have used conjoint choice to assess public preferences for alternative land uses in an ex-ante framework, i.e. masterplans. For our study, we wanted to concentrate on a “city of art,” where the relationship between cultural heritage resources management and city development is more critical. Venice was an obvious choice for the national and international relevance of its heritage. The Arsenale is one of the few places in Venice that has the potential for a real transformation of its uses, with important impacts on both residents and visitors. Moreover, the Arsenale plays a strong symbolic role: it was the place where the strength and power of the Serenissima was built. The City Council of Venice has recently deliberated that the Arsenale is an inalienable heritage of the city of Venice. In recent years, the importance of the Arsenale has resulted in a heated debate on its possible new uses. Many architectural proposals have been submitted through international competitions. These proposals—whether submitted in the past or currently under consideration—have shown that there may be a conflict between different possible land uses and the transformation allowed by the existing architectural structures. We surveyed individuals in Venice asking respondents to engage in conjoint choice tasks, gathering 168 usable observations. Members of the general public were intercepted at the Multimedia Library at Palazzo Querini Stampalia/FEEM and asked to indicate which choice they preferrd among hypothetical—but realistic—redevelopment projects of the Arsenale historic site. Each project was described by a vector of attributes, such as land use, use of basins and waterways, architectural features, access, employment implied by the reuse, and cost. The responses to these choice tasks was used to infer the rate at which respondents trade off land uses, aesthetic features, and costs, and hence to derive the value of marginal changes in the attributes, and the value of a proposed policy package. The Venice Arsenale is owned by the Italian government and is currently used by the Italian Navy. The Arsenale site accounts for about 15 percent of the area of the city of Venice (about 45 hectares), and is located in the Castello district. Tradition has it that doge Ordefalo Falier founded the Arsenale—a shipbuilding yard—in 1104. In 1340 the “Darsena Nuova” was created, which marked the birth of the Arsenal Nuovo and of the Corderie building. Further expansion started in 1473, covering an area of 26 hectares. This phase lasted more than 100 years, resulting in the construction of the New Corderie building, among others, in 1591. In its heyday, the Arsenale employed roughly 20,000 workers in an assembly-line fashion and produced one ship a day. The Arsenale, after the navy largely withdrew from the complex over 40 years ago, suffered from abandonment and under use. The Arsenale is, therefore, one of the few places in Venice that has the potential for a real transformation of its uses. In this paper we investigate how the development of the Arsenale site, involving alternative land uses, may influence the welfare of the residents of the historical city center of Venice. Starting from the evidence of our survey in Venice, the paper broaden its scope to discuss ways of improving the management of cultural heritage cities, focusing on new forms of involvement and public participation based on public preferences’ elicitation. We debate the issues related to city governance and the need for an appropriate level of democratic participation. An integrated approach, capable of bridging the practice of economic valuation, urban design, conservation of the built environment, and decision-making support systems is here analysed.
    Date: 2005–08
  21. By: Ghalwash, Tarek (Department of Economics, Umeå University)
    Abstract: This thesis consists of four papers: two of them deal with the relationship between consumption, energy taxation, and emissions on macro level, and two of them focus on the effects of changes in consumption and income on the environmental quality on a micro level. <p> The main objective of paper [I] is to examine how exogenous technological progress, in terms of an increase in energy efficiency, affects consumption choice by Swedish households and thereby emissions of carbon dioxide (CO2), sulphur dioxide (SO2) and nitrogen oxide (NOx). The aim of the paper is closely related to the discussion of what is known as the “rebound effect”. To neutralize the rebound effect, we estimate the necessary change in CO2 tax, i.e. the CO2 tax that keeps CO2 emissions at their initial level. In addition, we estimate how this will affect emissions of sulphur dioxide and nitrogen oxides. The results indicate that an increase in energy efficiency of 20 percent will increase emissions of CO2 by approximately 5 percent. To reduce the CO2 emissions to their initial level, CO2 tax must be raised by 130 percent. This tax increase will reduce the emissions of sulphur dioxide to below their initial level, but will leave the emissions of nitrogen oxides at a higher level than initially. <p> One of the premises implied in paper [II] is that the changes in consumer prices, as a result of changes in environmental taxes, may send a different signal to the consumer compared with other changes in consumer prices, such as changes in producer price. In addition, this assumed difference in the signaling effect of the changes in environmental taxes, compared to changes in the producer price, may also differ between different commodities. To achieve the objectives a system of demand functions for Swedish households is estimated. To test for the signaling effect of environmental taxes the consumer price for energy goods is partitioned into a producer price part and a tax part. <p> In Paper [III], we estimate the income elasticity of demand for recreational services and other traditional groups of goods in Sweden and we test for potential changes in such estimates over the twentieth century. The paper uses Swedish household surveys for the years 1913, 1984, 1988, and 1996. Because of the difficulty of directly observing the demand for recreational services, we employ an indirect methodology by using the demand for some outdoor goods as proxies for the recreational services demand. <p> In paper [IV], we investigate the relationship between pollution and income at the household level. Here we want to investigate, and hence contribute to the existing literature, under what conditions concerning individual preferences and the link between consumption and pollution a linear relationship is to be expected, but also to empirically assess the relationship. To achieve our objective we formulate a model determining different type of households’ choice of consumption for goods. Furthermore we link the demand model to emission functions for the various goods. The results from the empirical analysis show that, at least in a close neighborhood of observed income/pollution, we can reject linearity for all three types of pollutions, CO2, SO2, and NOx. According to our results the pollution/income relationships are all strictly concave. Thus the implication is that the income distribution seems to matter in the sense that equalization of income will lead to higher emissions. Furthermore it is shown that the slope as well as the curvature differ between different types of households, which means that preferences differ across households. <p> Keywords: Household consumption, energy demand, emissions, rebound effect, energy taxation, tax elasticities, environmental services, income elasticities, Engel Curves, income distribution.
    Keywords: Household consumption; energy demand; emissions; rebound effect; energy taxation; tax elasticities; environmental services; income elasticities; Engel Curves; income distribution
    JEL: D12 H31 H41 Q26 Q41 Q53 Q56
    Date: 2006–04–10
  22. By: Sophie Lavallée; Kristin Bartenstein
    Abstract: Considering both trade globalization and the growing media coverage of the deterioration of natural resources and the ozone layer, the average citizen has become more demanding as a consumer when it comes to the environmental quality of the products he purchases. In this context, the implementation of adequate labeling may become both a major competitive issue in the marketplace as well as a means of promoting sustainable development that will allow the inclusion of environmental considerations in production procedures and in individuals behavior and choices. Designed to inform both private and public consumers of a product’s environmental performance as compared to other products in the same category, the ecolabel is an excellent tool for the implementation of this new development paradigm. The ecolabel is a tool whose goal is to use markets in order to meet environmental goals. Presently, the ecolabel is the result of a “voluntary” step taken by manufacturer who takes it upon himself to declare that his products are ecological through the use of different seals or phrases (“nitrate free”, “ozone layer friendly”, “biodegrable”). Alternatively, the manufacturers may ask an independent organization for the right to use an ecolabel, by following a preset procedure and respecting pre-established criteria. Since the end of the 1980s, many countries have set up ecological certification and ecolabeling programs: the “European ecolabel”, the “Blue Angel” in Germany, the “Green Seal” in the United States, “NF” in France, “Eco-mark” in Japan, and the “Eco-logo” in Canada. For the last ten years, the ecolabel has drawn the interest of public authorities in Western countries. Over this same decade, Europeans have gained a level of expertise that today allows them to assume an international leadership role in the field of ecolabeling. In this context, several European jurists and economists have naturally become interested in the conditions linked to the development of this new tool for regulating production. Their studies show that the creation of a national policy of ecological labeling must be based on recognized standards – private or prescribed – so that the awarding of an ecolabel can be based on objective criteria. In the framework of trade liberalization, the development of the such ecolabel programs must be carried out while, ath the same time, an effort is made to avoid creating obstacles to international trade. Very little study has been devoted to the rules of international law that apply to this subject. This question is, however, central to the sustainable development tool. Our paper sets out to answer this question and to study the impact that the International Standards Organization’s (ISO) 14000 series of standards has had on the harmonization of national ecolabeling policies. Considering the impact of international law standards on the ecolabel’s development as a sustainable tool, it is logical to make an in-depth analysis of the conditions of national ecolabeling policy harmonization at the international level. <P>Destiné à informer le consommateur, privé ou public, sur la performance d’un produit ou d’un service, l’écolabel peut conférer un avantage concurrentiel indéniable à l’entreprise qui cherche à rejoindre une clientèle intéressée par les impacts environnementaux des produits qu’elle consomme. De fait, l’écolabel suscite de plus en plus l’intérêt des grandes entreprises qui le voient progressivement comme un facteur essentiel à prendre en considération dans leurs stratégies industrielles et commerciales. Cet intérêt des entreprises pour la certification écologique volontaire de leurs produits et services revêt une portée encore plus grande dans un contexte de globalisation des marchés puisqu’elle est susceptible d’être « (…) à la fois un mode de protection très efficace des marchés intérieurs et un instrument de conquête de plus en plus incontournable des marchés extérieurs ». Outil commercial véhiculant une information environnementale afin de conférer un avantage concurrentiel aux produits nationaux, l’écolabel pourrait être taxé d’outil du « protectionnisme vert ». Cette possibilité n’a pas encore donné lieu à de réelles contestations mais elle est néanmoins assez sérieuse pour figurer à l’ordre du jour des prochaines études de la Commission du commerce et de l’environnement (CCE) de l’Organisation mondiale du commerce (OMC). Cette commission a d’ailleurs exprimé l’opinion qu’il existe une panoplie de programmes de certifications alimentaires ou environnementales qui reposent sur différents critères et procédures qui sont susceptibles d’avoir des effets sur le commerce. Stigmatisé comme un nouvel obstacle technique au commerce international, l’écolabel pourrait être discrédité et son évolution compromise, malgré les possibilités qu’il représente pour la concrétisation des impératifs du développement durable. Cette éventualité nécessite que nous le soumettions à une analyse au regard des règles de droit du commerce international afin de déterminer s’il est ou non l’outil d’une politique protectionniste. Que la réponse à cette question soit ou non positive, nous verrons, en dernière analyse, que l’harmonisation des différents écolabels s’impose pour assurer l’essor de l’écolabellisation des produits et services. Afin de mener à bien cette réflexion, il convient de répondre aux trois questions suivantes : Qu’est-ce qu’un écolabel? L’écolabel est-il une barrière non tarifaire de protection des marchés intérieurs? Quelles sont les possibilités d’harmonisation internationale des différents écolabels ?
    Keywords: ecolabel, environmental labeling, regulation, protectionism, World Trade Organization (WTO), WTO accords, harmonization, International Standards Organization's (ISO) 14000 series, écolabels, étiquetage écologique, régulation, protectionnisme, Organisation Mondiale du Commerce (OMC), harmonisation, série de normes ISO 14020 et 14040
    Date: 2004–08–01
  23. By: Kristin Bartenstein; Sophie Lavallée
    Abstract: The Rio Earth Summit, held in Rio de Janeiro in 1992, certainly stands out as an unprecedented turnabout in planetary awareness of environmental concerns and the need for reconciliating the three axes of sustainable development, namely economic, social and environmental issues. The Rio Declaration sets forth 27 principles intended to orient the achievement of this vast project for humanity. Among these principles, the eighth one encourages States to“[…] reduce and eliminate unsustainable patterns of production and consumption[…]." By informing consumers of the net environmental impact of a product, the ecolabel may become a tool for sustainable development. Might it also be, however, a tool for green protectionism? This issue is inevitable owing to the multiplication of ecolabel programs worldwide since the phenomenal expansion of ecolables, applauded by some yet raising doubts among others who are questioning the conformity of these ecological labels with the international business rules set forth by the World Trade Organization (WTO). Not only is this issue a current one, it has also remained the subject of intense discussions within WTO for several years now. Our paper attempts to analyze the conformity of the ecolabel programs with the relevant provisions of WTO accords. As our analysis demonstrates, the very nature of the ecolabels, as they are currently designed, is such that they should not violate the rules of law governing these accords. Yet, the existence of a debate on the conformity of ecolables with international business rules is symptomatic of a non-so-negligible political and economic conflict concerning this issue. In the final analysis, we conclude that discussions should continue, but at another level, namely within the harmonization of the rules governing ecolabel programs in order to minimize the political and economic problems that ecolabels may likely cause. <P>Le Sommet de la Terre, tenu à Rio de Janeiro, en 1992, a certainement marqué un tournant sans précédent dans la prise de conscience des enjeux environnementaux de la planète et de la nécessité de concilier les trois pôles du développement durable que sont l’économique, le social et l’environnement. La Déclaration de Rio énonce 27 principes devant guider la réalisation de ce grand dessein pour l’humanité. Parmi ces derniers, le principe 8 encourage les États à « […] réduire et éliminer les modes de production et de consommation non viables ». En informant le consommateur de l’impact environnemental net d’un produit, l’écolabel peut devenir un outil du développement durable. Cependant, peut-il aussi être un outil du protectionnisme vert? Cette question s’impose devant la multiplication des programmes d’écolabels à l’échelle mondiale puisque l’expansion du phénomène des écolabels, applaudie par les uns, suscite néanmoins des doutes chez les autres qui remettent en question la conformité de ces labels écologiques avec les règles du commerce international édictées sous l’égide de l’Organisation mondiale du commerce (OMC). Cette question toujours actuelle suscite de vives discussions dans l’enceinte de l’OMC depuis quelques années déjà. Notre article se propose d’analyser la conformité des programmes d’écolabel avec les dispositions pertinentes des accords de l’OMC. Comme notre étude le montrera, la nature même des écolabels, tels qu’ils sont conçus actuellement, fait en sorte qu’ils ne devraient pas violer les règles de droit qui président à ces accords. Toutefois, l’existence d’un débat sur la conformité des écolabels avec les règles du commerce international est le signe d’un conflit politique et économique potentiel, et non négligeable, sur cette question. En dernière analyse, nous concluons que la discussion devrait être poursuivie, mais à un autre niveau, à savoir celui de l’harmonisation des règles régissant les programmes d’écolabels en vue de minimiser les problèmes politiques et économiques que les écolabels sont susceptibles d’engendrer.
    Keywords: ecolabel, environmental labeling, international trade, protectionism, World Trade Organization (WTO), WTO accords, écolabel, étiquetage écologique, commerce international, protectionnisme, organisation mondiale du commerce (OMC), accord sur les obstacles techniques au commerce (OTC)
    Date: 2004–08–01
  24. By: Burtraw, Dallas (Resources for the Future); Palmer, Karen (Resources for the Future); Kahn, Daniel (Resources for the Future)
    Abstract: Cap-and-trade programs for air emissions have become the widely accepted, preferred approach to cost-effective pollution reduction. One of the important design questions in a trading program is how to initially distribute the emissions allowances. Under the Acid Rain program created by Title IV of the Clean Air Act, most emissions allowances were distributed to current emitters on the basis of a historic measure of electricity generation in an approach known as grandfathering. Recent proposals have suggested two alternative approaches: allocation according to a formula that is updated over time according to some performance metric in a recent year (the share of electricity generation or something else) and auctioning allowances to the highest bidders. Prior research has shown that the manner in which allowances for carbon dioxide (CO2) are initially distributed can have substantial effects on the social cost of the policy as well as on who wins and who loses as a result of the policy. Another concern with a regional cap-and-trade program like the Regional Greenhouse Gas Initiative (RGGI) is the effect that different approaches to allocating emissions allowances will have on the level of CO2 emissions outside the region, commonly called emissions leakage. In this research we model historic, auction, and updating approaches to allowance allocation that we call bookends, then model various variations on these approaches. We consider changes in measures such as electricity price, the mix of generation technologies, and the emissions of conventional pollutants inside and outside the RGGI region. We examine the social cost of the program, measured as the change in economic surplus, which is the type of measure used in benefit–cost analysis. We also examine the effects of different approaches to distributing allowances on the net present value of generation assets inside and outside the RGGI region. We find that how allowances are allocated has an effect on electricity price, consumption, and the mix of technologies used to generate electricity. Electricity price increases the most with a historic or auction approach. Coal-fired generation in the RGGI region decreases under all approaches but decreases the most under updating. Gas-fired generation decreases under historic and auction approaches but increases substantially under updating. Renewable generation increases under historic and auction approaches but decreases slightly under updating as a consequence of the expanded generation from gas. Consistent with the changes in the composition of generation, the decline in emissions of conventional pollutants including sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury that was expected as a result of the Clean Air Interstate Rule is accelerated substantially as a result of the RGGI policy, particularly under updating. The cost of complying with SO2, NOx, and mercury rules declines similarly. We find that the social costs of the bookend auction and historic approaches are comparable and that the social cost of updating is roughly three times that of the other approaches. At the same time, updating yields greater emissions reductions on a national basis (because it produces less emissions leakage) and greater cumulative reductions in emissions at the national level than historic allocation. Varying the design of the updating approach can reduce its social costs but generally would increase leakage at the same time. An updating approach with allocation to all generators, including all nuclear and renewables has the lowest social cost within the RGGI region of any policy analyzed, although this result comes at the expense of costs imposed outside the region. When the approaches to allocation are mixed, we find the changes in electricity price, generation, and emissions are roughly a combination of the performance of each individual approach. In particular, social costs typically are lower under the scenarios that combine an auction with updating than when updating is the exclusive approach to distributing allowances. Who wins and who loses from the policy varies with the approach to allocation. Under a historic approach, producers in the RGGI region gain substantially and generally are better off than without the program; such is not true under an auction or updating. Producers also gain overall from the policy when a historic allocation is combined with an auction, but the gains are substantially less than in the 100% historic case. Producers outside the region tend to benefit considerably from the higher electricity price in the RGGI region but benefit the least under updating because the effect on electricity price is lowest. Consumers both inside and outside the RGGI region are adversely affected under all allocation approaches but much less so under updating because the change in electricity price is lowest. One exception is when eligibility for allowances under an updating allocation is limited to nonemitters only, in which case the electricity price increases substantially. Different types of generators fare differently under the various allocation approaches. Asset values for all types of generators are highest under a historic approach, although the difference between historic and auction approaches is small for nuclear generators. Compared with the baseline, both nuclear and existing gas-fired generators in the RGGI region gain under an auction. Only gas-fired generators gain under the bookend approach to updating, although nuclear generators benefit as well under updating designs that include them among those eligible for allowances. Coal-fired generators lose the most under updating. Moving from 100% updating to auctioning an increasingly larger share of allowances generally has a positive effect on asset values for all fuel types including coal. The one exception is that moving from 50% auction and 50% updating to 100% auction has a negative effect on the asset values for coal. Finally, we conduct sensitivity analyses with higher natural gas prices and constraints on electricity transmission capability. The social cost of the RGGI program does not appear to be sensitive to these constraints. Higher gas prices or transmission constraints alone impose significant costs that are larger than the effect of adding the RGGI policy. For example, their substantial effect on electricity price is greater than the added effect imposed by the RGGI program. The constraints that are modeled do not appear to have a strong impact on RGGI implementation. We also conduct a sensitivity analysis with renewables portfolio standard policies in place throughout the region. The resulting prices of electricity and CO2 emissions allowances are slightly lower than without the renewables policy.
    Keywords: emissions trading, allowance allocations, electricity, air pollution, auction, grandfathering, generation performance standard, output-based allocation, cost-effectiveness, greenhouse gases, climate change, global warming, carbon dioxide, sulfur dioxide, nitrogen oxides, mercury
    JEL: Q2 Q25 Q4 L94
    Date: 2005–06–16

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.