New Economics Papers
on Agricultural Economics
Issue of 2006‒08‒12
twenty-six papers chosen by

  1. Not guilty? Agriculture in the 1920s and the Great Depression By Giovanni Federico
  2. Railroads and Local Economic Development: The United States in the 1850s By Michael R. Haines; Robert A. Margo
  3. Trade Flows of Agricultural Products with Ireland and the EU : An Analysis for Six African Countries By Hannah Chaplin
  4. Smallholder Farming Under Increasingly Difficult Circumstances: Policy and Public Investment Priorities for Africa By T.S. Jayne; D. Mather; E. Mghenyi
  5. WTO Contstaints and the CAP: Domestic Support in EU 25 Agriculture By Jean-Pierre Butault; Jean-Christophe Bureau
  6. Are Price Changes in the World Market Transmitted to Markets in Less Developed Countries? A Case Study of Sugar, Cotton, Wheat, and Rice in Tanzania By F. T. M. Kilima
  7. How to Promote Quality Perception in Wine Markets: Brand Advertising or Geographical Indication? By Yue, Chengyan; Marette, Stéphan; Beghin, John C.
  8. Impact of Policy Reforms on Agriculture and Poverty in Uganda By Jacob Opolot; Rose Kuteesa
  9. A Study of the Factors that Influence Consumer Attitudes Toward Beef Products Using the Conjoint Market Analysis Tool By Mennecke, Brian; Townsend, Anthony; Hayes, Dermot J.; Lonergan, Steven
  10. The Economic Impacts of Climate Change Evidence from Agricultural Profits and Random Fluctuations in Weather By Olivier Deschenes; Michael Greenstone
  12. Removal of U.S. Ethanol Domestic and Trade Distortions: Impact on U.S. and Brazilian Ethanol Markets By Elobeid, Amani; Tokgoz, Simla
  13. The Theory of Tariff Rate Quotas: An Application to the U.S. Sugar program using MONASH-USA By Ashley Winston
  14. Using a Hedonic Model of Solar Radiation to Assess the Economic Effect of Climate Change: The Case of Mosel Valley Vineyards By Orley Ashenfelter; Karl Storchmann
  15. Linking sportfishing trip attributes, participation decisions, and regional economic impacts in Lower and Central Cook Inlet, Alaska By C. Hamel; M. Herrmann; S. Lee; Keith Criddle; H. Geier
  16. Modeling the effect of fishery attributes on participation rates and angler welfare: the Kenai Peninsula marine sport fishery By S. Lee; M. Herrmann; K. Criddle; C. Hamel
  17. Ratcheting in Renewable Resources Contracting By Urs Steiner Brandt; Frank Jensen; Lars Gårn Hansen; Niels Vestergaard
  18. Traceability in red meat: market opportunity or threat? By Sterling Liddell; DeeVon Bailey
  19. Contemporary research in ecological economics: five outstanding issues By A. Batabyal
  20. Market opportunities and threats to the U.S. pork industry posed by traceability systems By Sterling Liddell; DeeVon Bailey
  21. The evolution of the Dutch dairy industry and the rise of cooperatives: Combining transaction cost and evolutionary approaches By Koen Frenken; Gerben van der Steege
  22. A theoretical and empirical investigation of the supply response in the U.S. beef-cattle industry By D. Aadland; D. Bailey; S. Feng
  23. Preliminary analysis of the economic feasibility of a soybean processing facility in Utah By DeeVon Bailey; E. Godfrey
  24. Market timing and the cattle cycle: a clarification By D. Aadland; D. Bailey
  25. The economics of cattle supply By D. Aadland
  26. Market power in the beef packing industry: is it time for a new approach? By L. Hunnicutt

  1. By: Giovanni Federico
    Abstract: Agricultural distress in the 1920s is routinely quoted among the causes of the Great Depression. This paper challenges the conventional wisdom. World agriculture was not plagued by overproduction and falling terms of trade. The indebtedness of American farmers, a legacy of the boom years 1919-1921, did jeopardize the rural banks, but the relation between their crises, the banking panic of 1930 and the Great Depression is tenuous at best.
    Date: 2005–05
  2. By: Michael R. Haines; Robert A. Margo
    Abstract: We use county and individual-level data from 1850 and 1860 to examine the economic impact of gaining access to a railroad. Previous studies have found that rail access was positively correlated with the value of agricultural land at a point in time, and have interpreted this correlation as evidence that rail access chiefly benefitted agricultural land owners in the manner predicted by the Hekscher-Ohlin or Von Theunen models. We use a difference-in-difference strategy, comparing changes in outcomes in counties that gained rail access in the 1850s to those that either gained access earlier or did not have access before the Civil War. Most of the estimated effects are small and the signs are not wholly consistent with either model, under the null hypothesis that agriculture was the chief beneficiary of rail access. For example, we find that rail access appears to have increased urbanization, raised the likelihood of participation in the service sector, decreased agricultural yields, and reduced the share of improved acreage in total land area, opposite to the patterns predicted by either the Heckscher-Ohlin or Von Theunen models.
    JEL: N51 N71
    Date: 2006–07
  3. By: Hannah Chaplin
    Abstract: This paper documents the nature and importance of agricultural trade flows between the six Irish Aid programme countries in Sub-Saharan Africa and Ireland and the EU-15 over the period 1995-2003. The six countries are: Ethiopia, Uganda, Tanzania, Zambia, Mozambique and Lesotho. Agricultural exports from these countries are highly specialised, with coffee, tea and fish and fish products dominating. There is some evidence that improved market access to the EU under the Everything But Arms initiative has led to increased exports, particularly of sugar. The pattern of Ireland’s agricultural trade with the six countries differs in significant ways from the EU-15 as a whole. The agricultural trade balance was positive from the perspective of the Irish Aid programme countries, but the balance was declining over time.
    Keywords: Agricultural trade, developing countries
    Date: 2006–08–01
  4. By: T.S. Jayne (Department of Agricultural Economics, Michigan State University); D. Mather; E. Mghenyi
    Abstract: This paper identifies major trends affecting the future of the small farm in Sub-Saharan Africa, and identifies policy responses and public investment strategies by African governments, governments of high-income countries, and multilateral donors that can give African smallholders the chance to be viable in an increasingly globalized world.
    Keywords: food security, food policy, agriculture policy
    JEL: Q18
    Date: 2006
  5. By: Jean-Pierre Butault; Jean-Christophe Bureau
    Abstract: The most recent EU notifications to the World Trade Organization regarding domestic support refer to the EU-15, i.e. before significant reforms of the direct payments as well as the reforms of the Mediterranean products, hops, sugar, etc. that took place after 2003. We estimate the actual level of domestic support, as measured by the WTO Aggregate Measure of Support (AMS), given the 2004 EU enlargement and the recent reforms of the Common Agricultural Policy (CAP). We then compare the different proposals for a new discipline on domestic support that were recently issued under the Doha Development Round and we assess the constraints imposed on the Common Agricultural Policy (CAP). The EU proposal prior to the 2005 Hong Kong WTO ministerial meeting was that the EU would cut its present AMS and Overall Trade Distorting Support (OTDS) ceilings by 70% in either case. We find that such a cut mainly consolidates under the WTO the significant changes made to EU domestic support policies since the conclusion of the Uruguay Round. However, there are some downside risks for the EU and much depends on the further negotiations on the details of the disciplines to be agreed (e.g. the base period for the OTDS reference). In addition, a 70% cut leave no freedom for counting some potentially controversial subsidies against the AMS if needed. Accession of Bulgarian and Romania will make the constraints more binding. The ability to meet the domestic support discipline of the EU offer relies on the assumption that its market access component will lead to a significant reduction in the remaining AMS (particularly important in the case of fruits and vegetables). Overall, the EU proposal regarding a cut in the AMS is binding, even though it requires rather minor and sectoral changes to the CAP. Proposals that beyond the EU ‘Hong Kong’ offer require reforming some common market organizations, but could be dealt with if the EU implemented a significant reform of the fruits and vegetables sector, that might give a larger degree of freedom regarding the AMS ceiling.
    Date: 2006–08–02
  6. By: F. T. M. Kilima
    Abstract: This paper investigates the extent to which world market price changes are transmitted through changes in border prices into local producer prices for four agricultural product markets in Tanzania: sugar, cotton, wheat and rice. The changes in the marketing channels for each of these products resulting from market liberalization are described. The statistical analysis finds that, in general, Tanzanian border and world market prices for these products do not move closely together, although there is evidence that border prices are influenced by world market price levels but not vice versa. The absence of monthly price data at producer level for these products did not permit a detailed examination of the relationship between farmgate prices and either border prices or world market prices. However, the qualitative discussion suggests that the extent of price transmission is likely to be imperfect. These results have implications for the interpretation of simulation results modelling the potential impact of trade policy changes on Tanzanian producers and consumers. They also underline the need for concerted efforts by policy makers to reduce the extent of monopoly power in these marketing chains and to improve the degree of price transmission.
    Keywords: Agricultural trade, price transmission, developing countries
    Date: 2006–08–01
  7. By: Yue, Chengyan; Marette, Stéphan; Beghin, John C.
    Abstract: In the context of the wine industry, we investigate producers’ choice between geographical indications and brand advertising to convey information to consumers. Producers also decide whether or not to select an effort level for improving the quality of their products. We show that if this effort level is selected, a producer will prefer to rely on brand advertising for promoting its products and setting up its own reputation. Despite allowing the cost of promotion to be shared, a geographical indication does not sufficiently reward the effort to improve quality. Finally, the selection of both instruments by producers is examined.
    Keywords: brand advertising, effort, geographical indication, GI, quality, wine.
    Date: 2006–08–01
  8. By: Jacob Opolot; Rose Kuteesa
    Abstract: This paper reviews the recent economic performance of the Ugandan economy, with a particular emphasis on the impact of the reform program on agricultural development and poverty. The constituent elements of the reform program in place since 1987 are described, and the resulting impact on the real economy is critically assessed. There was a significant fall in the headcount poverty ratio between 1992/93 and 1999/00 although more recently this trend has reversed. Uganda experienced a strong deterioration in its external terms of trade as well as high population growth rates which make it more difficult to meet its poverty eradication objectives. Government policies set out in the Poverty Eradication Action Plan and the Plan for Modernization of Agriculture are initiatives in the right direction, but require sustained effort to ensure their implementation.
    Keywords: Policy reform, agriculture, poverty, food security
    Date: 2006–08–01
  9. By: Mennecke, Brian; Townsend, Anthony; Hayes, Dermot J.; Lonergan, Steven
    Abstract: This study utilizes an analysis technique commonly used in marketing, the conjoint method, to examine the relative utilities of a set of beef steak characteristics considered by a national sample of 1,432 U.S. consumers, as well as additional localized samples representing undergraduate students at a business college and in an animal science department. The analyses indicate that among all respondents, region of origin is by far the most important characteristic; this is followed by animal breed, traceability, the animal feed used, and beef quality. Alternatively, the cost of cut, farm ownership, the non-use of growth promoters, and whether the product is guaranteed tender were the least important factors. Results for animal science undergraduates are similar to the aggregate results except that these students emphasized beef quality at the expense of traceability and the non-use of growth promoters. Business students also emphasized region of origin but then emphasized traceability and cost. The ideal steak for the aggregate group is from a locally produced choice Angus, fed a mixture of grain and grass that is traceable to the farm or origin. If the product was not produced locally respondents indicated that their preferred production states are, in order from most to least preferred, Iowa, Texas, Nebraska, and Kansas.
    Keywords: conjoint market analysis, consumer preferences, country of origin, steak quality, traceability, transactions costs.
    Date: 2006–08–01
  10. By: Olivier Deschenes; Michael Greenstone
    Abstract: We thank the late David Bradford for initiating a conversation that motivated this paper. Our admiration for David’s brilliance as an economist was only exceeded by our admiration for him as a human being. We are grateful for the especially valuable criticisms from David Card and two anonymous referees. Hoyt Bleakley, Tim Conley, Tony Fisher, Michael Hanemann, Enrico Moretti, Marc Nerlove, and Wolfram Schlenker provided insightful comments. We are also grateful for comments from seminar participants at Maryland, Princeton, Yale, the NBER Environmental Economics Summer Institute, and the “Conference on Spatial and Social Interactions in Economics” at the University of California-Santa Barbara. Anand Dash, Elizabeth Greenwood, Barrett Kirwan, Nick Nagle, and William Young, provided outstanding research assistance. We are indebted to Shawn Bucholtz at the United States Department of Agriculture for generously generating weather data for this analysis from the Parameterelevation Regressions on Independent Slopes Model. Finally, we acknowledge The Vegetation/Ecosystem Modeling and Analysis Project and the Atmosphere Section, National Center for Atmospheric Research for access to the Transient Climate database, which we used to obtain regional climate change predictions. Greenstone acknowledges generous funding from the American Bar Foundation.
    Date: 2006–01
  11. By: Kenneth W. Clements; Renee Fry
    Abstract: There is a large literature on the influence of commodity prices on the currencies of countries with a large commodity-based export sector such as Australia, New Zealand and Canada ("commodity currencies"). There is also the idea that because of pricing power, the value of currencies of certain commodity-producing countries affects commodity prices, such as metals, energy, and agricultural-based products ("currency commodities"). This paper merges these two strands of the literature to analyse the simultaneous workings of commodity and currency markets. We implement the approach by using the Kalman filter to jointly estimate the determinants of the prices of these currencies and commodities. Included in the specification is an allowance for spillovers between the two asset types. The methodology is able to determine the extent that currencies are indeed driven by commodities, or that commodities are driven by currencies, over the period 1975 to 2005.
    Date: 2006–07
  12. By: Elobeid, Amani; Tokgoz, Simla
    Abstract: We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on U.S. and Brazilian ethanol markets using a multi-market international ethanol model calibrated on 2005 market data and policies. The removal of trade distortions induces a 23.2 percent increase in the price of world ethanol on average between 2006 and 2015 relative to the baseline. The U.S. domestic ethanol price decreases by 14.1 percent, which results in a 7.5 percent decline in production and a 3.2 percent increase in consumption. The lower domestic price leads to a 2.5 percent rise in the share of fuel ethanol in gasoline consumption. U.S. net ethanol imports increase by 192.8 percent. Brazil responds to the higher world ethanol price by increasing its production by 8.8 percent on average. Total ethanol consumption in Brazil decreases by 3.2 percent and net exports increase by 61.9 percent relative to the baseline. The higher ethanol price leads to a 4.7 percent increase in the share of sugarcane used in ethanol production. The removal of trade distortions and 51¢ per gallon tax credit to refiners blending ethanol induces a 22.5 percent increase in the world ethanol price.
    Keywords: biofuels, ethanol, renewable fuels, trade liberalization.
    Date: 2006–08–02
  13. By: Ashley Winston
    Abstract: MONASH-USA (also known as USAGE-ITC) is a detailed dynamic general equilibrium model of the U.S. developed by the Centre of Policy Studies in collaboration with the U.S. International Trade Commission. This paper reports on the theoretical developments completed for a project intended to (a) add detail to the industry and commodity classification of the relevant sectors and (b) create a detailed modelling structure for the U.S. trade and industry-support policies that affect these sectors. A secondary theme of the research is the development and application of methods for modelling complementarity relationships in a large-scale general equilibrium framework. Data issues and simulation results are discussed in a second paper.
    Keywords: international trade, agricultural policy, sugar, commercial policy, tariff-rate quotas, complementarity relationships, dynamic general equilibrium modelling
    JEL: C61 C63 C68 D58 F13 Q13 Q17 Q18
    Date: 2005–07
  14. By: Orley Ashenfelter; Karl Storchmann
    Abstract: In this paper we provide a simple, credible method for assessing the effects of climate change on the quality of agricultural land and then apply this method using a rich set of data on the vineyards of the Mosel Valley in Germany. The basic idea is to use a simple model of solar radiation to measure the amount of energy collected by a vineyard, and then to establish the econometric relation between energy and vineyard quality. Coupling this hedonic function with the elementary physics of heat and energy permits a straightforward calculation of the impact of any climate change on vineyard quality (and prices). We show that the variability in vineyard quality in this region is due primarily to the extent to which each vineyard is able to capture radiant solar energy, so that these data provide a particularly credible “experiment” for identifying and measuring the appropriate hedonic equation. Our empirical results indicate that the vineyards of the Mosel Valley will increase in value under a scenario of global warming, and perhaps by a considerable amount. Vineyard and grape prices increase more than proportionally with greater ripeness, so that we estimate a 3°C increase in temperature would more than double the value of this vineyard area, while a 1°C increase would increase prices by about 20 percent.
    JEL: C2 Q5
    Date: 2006–07
  15. By: C. Hamel; M. Herrmann; S. Lee; Keith Criddle; H. Geier
    Abstract: Forecasts of the regional economic impacts of changes in the demand for recreation occasioned by regulatory changes, changes in the quality of the recreation experience, or changes in average trip costs require a model that links changes in these trip attributes to individual participation decisions and population participation rates. The probability that an individual will take a particular recreational trip is described using a nonlinear random effects probit model based on variable trip attributes and individual economic and demographic characteristics. These conditional individual probabilities are transformed into predictions of changes in total recreation demand using a simulation-based sample enumeration method. The regional impacts associated with ensuing changes in primary and secondary expenditure patterns are elucidated with a stand-alone recreation-sector module linked to a regionally adjusted zip code-level input-output model. Because the participation model allows for nonconstant marginal utility, primary and secondary impacts exhibit nonlinear responses to variations in trip attributes. The modeling approach is demonstrated in an application to the saltwater sport fisheries for Pacific halibut and salmon in Lower and Central Cook Inlet, Alaska.
  16. By: S. Lee; M. Herrmann; K. Criddle; C. Hamel
    Abstract: Changes in sportfishing trip attributes such as cost, harvest regulations, environmental quality, and resource abundance, affect both the expected net benefits associated with a fishing trip and participation decisions. The ability to estimate both of these is important for various types of policy analysis. This study uses stated preference questions of anglers who sport fished in the marine waters off the Kenai Peninsula. Alaska to estimate a nonlinear random effects probit model that expresses both angler net benefits and participation rates as functions of trip attributes. The use of stated preference data along with a nonlinear utility specification allows for the simulation of a wide range of policy scenarios. The study design permits the identification of substitution and complementary effects across fishing trip attributes, as well as nonlinear marginal utility.
    Keywords: compensating variation, participation rate, random effects probit, sport fishery, stated preference method
  17. By: Urs Steiner Brandt (Department of Environmental and Business Economics, University of Southern Denmark); Frank Jensen (Institute of Local Government Studies, Denmark); Lars Gårn Hansen (Institute of Local Government Studies, Denmark); Niels Vestergaard (Department of Environmental and Business Economics, University of Southern Denmark)
    Abstract: Real life implies that public procurement contracting of renewable resources results in repeated interaction between a principal and the agents. The present paper analyses ratchet effects in contracting of renewable resources and how the presence of a resource constraint alters the “standard” ratchet effect result. We use a linear reward scheme to influence the incentives of the agents. It is shown that for some renewable resources we might end up both with more or with less pooling in the first-period compared to a situation without a resource constraint. The reason is that the resource constraint implies a smaller performance de-pendent bonus, which reduces the first-period cost from concealing information but at the same time the resource constraint may also imply that second-period benefits from this concealment for the efficient agent are reduced. In situations with high likelihood of first-period pooling, the appropriateness of applying lin-ear incentive schemes can be questioned.
    Keywords: Political support function, political economy, environmental regula-tion, lobbyism, rent-seeking, taxation, auction, grandfathering, emission trad-ing, European Union, interest groups, industry, consumers, environmentalists
    JEL: Q28 H2 H4
    Date: 2004–09
  18. By: Sterling Liddell; DeeVon Bailey
    Abstract: Traceability poses market opportunities and threats for U.S. red meat producers for at least two reasons. First, consumers are becoming more concerned about the inputs and practices used to produce food and the ability to trace red meat to its source is an essential step in providing information to consumers about inputs and practices. Second, our principal competitors and customers in international red meat trade have been developing traceability systems. If our competitors are successful in differentiating their red meat products based on traceability, it could have a potentially devastating effect on U.S. red meat trade. This paper discusses these potential opportunities and threats and discusses the genesis of traceability, transparency, and assurance (TTA) in red meat markets.
  19. By: A. Batabyal
    Abstract: In recent times, ecologists and economists have drawn attention to the fact ecological and economic systems are jointly determined. Once this is recognized, it seems rather obvious that ecological-economic systems ought to be studied as one system. However, because this recognition has been very recent, a number of important issues in ecological economics remain poorly understood. Consequently, the purpose of this paper is to identify and discuss five of these outstanding issues.
    Keywords: Ecological-economic system, keystone species, natural capital, optimal management, persistence, resilience, substitutability
  20. By: Sterling Liddell; DeeVon Bailey
    Abstract: This paper demonstrates that the U.S. pork industry is lagging its principal international competitors and major international customers in terms of developing programs for traceability, transparency, and assurance (TTA). The primary areas of weakness in U.S. TTA programs are at the producer level and in the area of providing consumers quality assurance regarding inputs used in producing pork products. We conclude that the U.S. pork industry may diminish its competitive advantage in world pork markets if it fails to enhance its TTA programs.
  21. By: Koen Frenken; Gerben van der Steege
    Abstract: The thesis advanced in this paper holds that any transaction cost explanation of the diffusion of a particular organizational form requires an evolutionary analysis of differential performance of competing organizational forms over time. Using data on 1141 dairy factories in The Netherlands, we find evidence that cooperative factories performed significantly better than private factories, which can be explained by cooperatives’ lower transaction costs. However, superior performance is observed only in the Northern part, while cooperatives were more dominant in the Southern part. This suggests that entry conditions for cooperative factories in the South were more favourable than in the North.
    Keywords: transaction cost economics, survival analysis, industry lifecycle, dairy industry, cooperatives
    Date: 2006–07
  22. By: D. Aadland; D. Bailey; S. Feng
    Abstract: This paper investigates the response of beef cattle producers to changes in the price of cattle. Previous research has suggested that there may be a negative short-run supply response to a permanent increase in the price of cattle. We build a dynamic, rational expectations model that predicts that the supply response is generally positive, even for permanent shocks in the short run, and nests the negative supply response as a special case for appropriately restricted demand shocks. Using annual U.S. time-series data (1930-1997) and a simultaneous-equations econometric approach, we find a positive short-run supply response in the cow market and mixed evidence in the heifer market.
  23. By: DeeVon Bailey; E. Godfrey
  24. By: D. Aadland; D. Bailey
    Abstract: This note addresses the issue of countercyclical strategies in the beef-cattle industry. It also attempts to clarify and comment on several issues raised by Hamilton and Kastens (2000) in their article entitled “Does Market Timing Contribute to the Cattle Cycle?”
  25. By: D. Aadland
    Abstract: This paper builds a dynamic rational expectations model describing the supply of cattle. The theoretical model improves on existing models by allowing cow-calf operators to make period-by-period investment decisions on both the cow and calf margins, separates the markets for fed and unfed beef, and considers a rich set of exogenous shocks. The model is calibrated and used to simulate artificial data that replicates several empirical regularities associated with the cattle cycle.
    JEL: C61 Q11 Q12
  26. By: L. Hunnicutt
    Abstract: Consolidations in the U.S. beef packing industry have prompted concern within the government and interest among academics over whether packers possess and are able to exercise market power. Economists have generated numerous studies to test for and measure market power in beef packing, but the empirical studies have failed to provide definitive results on the presence of market power and whether any existing market power is exercised. The thesis of this paper is that the standard approach to measuring market power, conjectural variations, is based on a model which may not accurately describe competition between packing firms. I first discuss the institutional factors of beef packing that are not captured by the conjectural variations approach. I then present a theoretical extension of the CV approach which is based on a more realistic description of competition between packing firms. The paper concludes by suggesting alternative techniques for measuring market power.

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