New Economics Papers
on Agricultural Economics
Issue of 2007‒04‒14
thirteen papers chosen by

  1. Smallholder Household Maize Production and Marketing Behavior in Zambia: Implications for Policy By Ballard Zulu; T.S. Jayne; Margaret Beaver
  2. A Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results By Paul Dorosh; Muhammad Khan Niazi; Hina Nazli
  3. Why Isn’t the Doha Development Agenda More Poverty Friendly? By Hertel, Thomas; Keeney, Roman; Ivanic, Maros; Winters, Alan
  4. Contract Duration and the Division of Labor in Agricultural Land Leases By Jonathan Yoder; Ishrat Hossain; Francis Epplin; Damona Doye
  5. Sydney Water: Pricing for Sustainability By R. Quentin Grafton and Tom Kompas
  6. Wheat Markets and Price Stabilisation in Pakistan: An Analysis of Policy Options By Paul Dorosh; Abdul Salam
  7. Consumption Responses to In-Kind Transfers: Evidence from the Introduction of the Food Stamp Program By Hilary W. Hoynes; Diane Schanzenbach
  8. Economic Valuation Of Non-Timber Forest Products (NTFPs) By Adepoju, Adenike Adebusola; Salau, Adekunle Sheu
  9. Sources of Regional Income Disparity in Rural Vietnam: Oaxaca-Blinder Decomposition By Takahashi, Kazushi
  10. An Econometric Model of Wildfire Suppression Productivity By Mariam Lankoande; Jonathan Yoder
  11. Voluntary Environmental Regulation in Developing Countries: Fad or Fix? By Blackman, Allen
  12. Too Good to Be True? Three Economic Assessments of California Climate Change Policy By Stavins, Robert N.; Jaffe, Judson; Schatzki, Todd
  13. Hedging global environment risks: An option based portfolio insurance By André de Palma; Jean-Luc Prigent

  1. By: Ballard Zulu (Department of Agricultural Economics, Michigan State University); T.S. Jayne (Department of Agricultural Economics, Michigan State University); Margaret Beaver (Department of Agricultural Economics, Michigan State University)
    Abstract: CSO/MACO nationally-representative rural surveys provide important insights on smallholder crop marketing behavior from the 2001 and 2004 harvests. Only about 25 percent of smallholder farmers in Zambia sold maize in both seasons, and about 15-20 percent of smallholders sold fresh horticulture as well as groundnuts, with 11-13 percent selling cassava. From 6-10 percent of farmers produced and sold cotton. Overall, Zambian smallholder agriculture has become more diversified over the past decade, with maize, cassava, groundnuts, cotton, horticultural crops, and animal products all becoming important sources of cash revenue as well as production for home consumption (except, of course, cotton). Importantly in both seasons studied, horticulture crop sales are roughly equivalent to the value of maize sales nationwide There is substantial variation in farm income and off-farm income across small farm households, owing to disparities in landholding size, other productive assets, and variables affecting access to markets. Two percent of all smallholder farms nationwide accounted for over 40% of all the maize sold by smallholder households in Zambia in 2000/01 and 2003/04. This same two percent of smallholder households also accounted for about 17% and 20% of the total value of all crop sales of the smallholder sector. Poverty reduction policy options are severely constrained by these production and marketing patterns especially if operating though programs that raise market prices for sellers and buyers.
    Keywords: food security, food policy, Zambia, maize, production, marketing
    JEL: Q20
    Date: 2007
  2. By: Paul Dorosh (The World Bank, Washington, D. C.); Muhammad Khan Niazi (Innovative Development Strategies, Islamabad); Hina Nazli (Innovative Development Strategies, Islamabad)
    Abstract: This paper describes the structure and construction of a social accounting matrix (SAM) for Pakistan for 2001-02. A SAM is an internally consistent extended set of national accounts that disaggregates value-added in each production activity into payments to various factors (e.g., land, labour, capital), and disaggregates household incomes and expenditures according to various household types. Because this Pakistan SAM is designed for analysis of the links between growth and rural poverty, agricultural activities, agricultural factors of production, and rural household accounts are more disaggregated than are those for urban activities and households. Rural household groups in the SAM are split according to three regions (Punjab, Sindh, and Other Pakistan) to capture the large differences in the structure of agricultural production and incomes across Pakistan. On average, household incomes in the SAM are 2.1 times greater than household expenditures in the HIES Survey, reflecting the apparent substantial under-reporting of expenditures (particularly on services) and informal sector incomes in the HIES and other household surveys. Agricultural factor incomes as calculated in the SAM account for only 23 percent of total factor incomes in Pakistan, but 60 percent of total factor incomes for agricultural households. 91 percent of agricultural incomes derive from land, water, own-farm labour, or livestock; earnings of hired labour and (nonlivestock) agricultural capital account for only 9 percent of agricultural incomes. Incomes of large- and medium-farm rural households, calculated using land area cultivated, data from the Agricultural Census, and other data, are significantly higher than indicated in household surveys
    Keywords: National accounts, Social accounting matrix
    JEL: E01
    Date: 2006
  3. By: Hertel, Thomas; Keeney, Roman; Ivanic, Maros; Winters, Alan
    Abstract: The breakdown of the WTO negotiations under the Doha Development Agenda has inspired critics to highlight the lack of effort on the part of rich countries to reform their agricultural policies. In this paper, we focus instead the poverty impacts of developing country tariff cuts - particularly those in agriculture. We argue that the Doha Development Agenda is fundamentally less poverty-friendly than it could be -- in large part due to the absence of tariff cuts on staple food products in developing countries. Such cuts would give the poor access to food at world prices, thereby reducing the cost of living at the poverty line. We also explore the contention that such tariff cuts will hurt the poor working in agriculture. Based on our analysis of the impacts of multilateral trade policy reforms on a sample of fifteen developing countries, we find there is some evidence of poverty increases in agriculture. However, such effects are minimized by ensuring that agricultural tariffs are cut in all developing countries. Overall, the poverty-reducing impact of lower food prices dominates; we conclude that the Doha Development Agenda would be more poverty friendly if it were to include deeper cuts in developing country agricultural tariffs. This contrasts sharply with calls for special products exemptions by many developing country advocates.
    Date: 2007
  4. By: Jonathan Yoder; Ishrat Hossain; Francis Epplin; Damona Doye (School of Economic Sciences, Washington State University)
    Abstract: This paper characterizes a set of Nash equilibria in a first-price sealed-bid auction with the right of first refusal using two bidders and asymmetric information regarding the bidders’ value distributions. The equilibria for multiple bidders and a more general value distribution are also presented
    Keywords: repeated auction; land lease contracts, moral hazard, contract duration, division of labor
    JEL: J43 L23 Q15
    Date: 2005–05
  5. By: R. Quentin Grafton and Tom Kompas
    Abstract: We examine how scarcity pricing can be used to assist with urban water demand management in Sydney in low rainfall periods using an estimated aggregate daily water demand function. Modelling shows that current water supplies and water prices are inadequate to prevent Sydney reaching critically low water storage levels should there be a low rainfall period similar to what occurred in 2001-2005. Simulations indicate that, in low rainfall periods, the water price needed to balance supply and demand exceeds the marginal cost of supplying desalinised water. The policy implication is that even with expected increases in supply (groundwater withdrawals, recycling), Sydney water prices must be substantially raised over their current levels, preferably at predefined water storage trigger levels, in response to low rainfall periods.
    Date: 2006
  6. By: Paul Dorosh (The World Bank, Washington, D. C.); Abdul Salam (Pakistan Agricultural Prices Commission, Islamabad)
    Abstract: This article provides a quantitative analysis of the effects of Pakistan government domestic wheat procurement, sales, and trade policies on wheat supply, demand, prices, and overall inflation. Analysis of price multipliers indicates that increases in wheat procurement prices (one means of promoting domestic procurement) have relatively small effects on overall price levels. Partial equilibrium analysis of wheat markets suggests that fluctuations in production, rather than market manipulation, are plausible explanations for price increases in recent years. Comparisons of domestic and international prices suggest that promoting private sector imports is one alternative for increasing supply and stabilising market prices, particularly in years of production shortfalls. Overall, this paper concludes that market forces play a dominant role in price determination in Pakistan, and that policies that promote the private sector wheat trade can both increase price stability and reduce fiscal costs
    Keywords: Wheat, Agricultural prices, Pakistan
    JEL: Q11 Q13
    Date: 2006
  7. By: Hilary W. Hoynes; Diane Schanzenbach
    Abstract: Economists have strong theoretical predictions about how in-kind transfer programs -- such as providing vouchers for food -- impact consumption. Despite the prominence of the theory, there has been little empirical work documenting actual responses to in-kind transfers. In this work, we leverage previously underutilized variation in the date of the county-level original implementation of the Food Stamp Program in the 1960s and early 1970s. Using the Panel Study of Income Dynamics, we employ difference-in-difference methods to estimate the impact of program availability on food spending, labor supply and family income. Consistent with theoretical predictions, we find that the introduction of food stamps leads to a decrease in out of pocket food spending, an increase in overall food expenditures, and a decrease (although insignificant) in the propensity to take meals out. The results are quite precisely estimated for total food spending, with less precision in estimating the impacts on out of pocket food costs. We find evidence of small work disincentive impacts in the PSID, which is confirmed with an analysis of the 1960, 1970 and 1980 Census.
    JEL: H31 I38
    Date: 2007–04
  8. By: Adepoju, Adenike Adebusola; Salau, Adekunle Sheu
    Abstract: The paper reviewed the methods in use for the economic valuation of Non-timber forest products. In the main, three methods are used. They are direct market price, indirect market price and non-market estimates. No method is superior to the other but appropriate method of valuation depends on the objective of the study. Also in use, is the financial valuation method. NTFPs can be classified as tradable or non tradable. The tradable NTFPs are significant in international trade. Non-timber forest products also constitute a critical component of food security; it serves as an important source of income for the poor in many developing countries. Value is not the inherent property of an entity. It is only a measure of a relationship between a subject and the object of valuation within a context (time and place or hypothetical scenario). There is a fundamental distinction to be made between a valuation exercise that sets out to explain how choices are made by individual resource users and one that seeks to maximize community. NTFPs include Edibles such as Mushroom, ferns etc. medicinal and dietary supplements, floral products and specialty wood products.
    Keywords: Non-Timber Forest Products (NTFPs); Economic Valuation; Livelihood and Food security
    JEL: Q57 Q27 Q23 Q20
    Date: 2007–04–09
  9. By: Takahashi, Kazushi
    Abstract: This paper investigates determinants of regional income disparity in rural Vietnam, with special emphasis placed on the roles of human capital and land. We apply a decomposition method, suggested by Oaxaca and Blinder. We found that returns to assets rather than endowments, especially those of human capital, are one of the leading factors to account for income differences across regions. We also found that substantial improvements of returns to human capital in the Red River delta region are a driving force to catch up with Mekong River delta region. Unexpectedly, differences in land endowment do not strongly correlate with regional income disparity because better access to land in a region was partially offset by lower returns.
    Keywords: Income inequality, Human capital, Land, Vietnam, Income distribution, Human resources
    JEL: D31 I32 O12
    Date: 2007–03
  10. By: Mariam Lankoande; Jonathan Yoder (School of Economic Sciences, Washington State University)
    Abstract: We estimate a model of suppression productivity for individual fires, where suppression productivity is measured in terms of the reduction in the estimated market value of wildfire losses. Estimation results show that at the margin, every dollar increase in suppression costs reduces resource damage by 12 cents, while each dollar invested in pre-suppression reduces suppression expenditures by 3.76 dollars. These results suggest that there is an over-allocation of fire management funds to suppression activities relative to prevention measures in terms of cost-effectiveness. This paper provides an empirical basis for a widely used economic model of wildfire management that seeks to minimize the sum of suppression costs and economic losses from wildfires, the cost plus net value change model of fire suppression (C+NVC).
    Keywords: wildfire suppression, productivity
    JEL: Q2
    Date: 2006–10
  11. By: Blackman, Allen (Resources for the Future)
    Abstract: Hamstrung by weak institutions that undermine conventional environmental regulatory tools, policymakers in developing countries are increasingly turning to voluntary approaches. Yet the evaluative literature on the topic is thin. To help fill this gap, we review arguments for and against the use of voluntary regulation in developing countries and present three case studies: a series of agreements negotiated between regulators and leather tanners in Guanajuato, Mexico; a national environmental audit program in Mexico; and a national public disclosure program in Indonesia. Admittedly few in number, these case studies nevertheless suggest that although voluntary environmental regulation in developing countries is a risky endeavor, it is by no means doomed to failure. The risks can be minimized by emphasizing the dissemination of information about pollution and pollution abatement options and by avoiding voluntary tools in situations where regulatory and nonregulatory pressures for improved environmental performance are weak and where polluters can block quantified targets, individual sanctions for noncompliance, and other widely accepted prerequisites of effective initiatives.
    Keywords: voluntary regulation, environment, developing country, Mexico, Indonesia
    JEL: Q28 O13
    Date: 2007–03–16
  12. By: Stavins, Robert N.; Jaffe, Judson; Schatzki, Todd
    Abstract: California’s Global Warming Solutions Act of 2006 limits California’s greenhouse gas (GHG) emissions in 2020 to their 1990 level. Global climate change is a pressing environmental problem, and the best possible public policies will be required to address it. Therefore, analyses of prospective policies must themselves be of high quality, so that policymakers can reasonably rely on them when making the critical decisions they inevitably will face. In 2006, three studies were released indicating that California can meet its 2020 target at no net economic cost — raising questions about whether opportunities truly exist to substantially reduce emissions at no cost, or whether studies reaching such conclusions may simply severely underestimate costs. This paper provides an evaluation of these three California studies. We find that although opportunities may exist for some no-cost emission reductions, these California studies substantially underestimate the cost of meeting California’s 2020 target. The studies underestimate costs by omitting important components of the costs of emission reduction efforts, and by overestimating offsetting savings that some of those efforts yield through improved energy efficiency. In some cases, the studies focus on the costs of particular actions to reduce emissions, but fail to consider the effectiveness and costs of policies that would be necessary to bring about such actions. While quantifying the full extent of the resulting cost underestimation is beyond the scope of our study, the underestimation is clearly economically significant. A few of the identified flaws individually lead to underestimation of annual costs on the order of billions of dollars. Hence, these studies do not offer reliable estimates of the cost of meeting California’s 2020 target. Better analyses are needed to inform policymakers. While the Global Warming Solutions Act of 2006 sets a 2020 emissions target, critical policy design decisions remain to be made that will fundamentally affect the cost of California’s climate policy. For example, policymakers must determine emission targets for the years before and after 2020, the emission sources that will be regulated to meet those targets, and the policy instruments that will be employed. The California studies do not directly address the cost implications of these and other policy design decisions, and their overly optimistic findings may leave policymakers with an inadequate appreciation of the stakes associated with decisions that lie ahead. As such, California would benefit from studies that specifically assess the cost implications of alternative policy designs.Nonetheless, a careful evaluation of the California studies highlights some important policy design lessons that apply regardless of the extent to which no-cost emission reduction opportunities actually exist. In particular, policies should be designed to account for uncertainty regarding emission reduction costs, much of which will not be resolved before policies must be enacted. Also, consideration of the different market failures that lead to excessive GHG emissions makes clear that to reduce emissions cost-effectively, policymakers should adopt a market-based policy (such as a cap-and-trade system) as the core policy instrument. The presence of specific market failures that may lead to some no-cost emission reduction opportunities suggests the potential value of additional policies that act as complements, rather than alternatives, to a market-based policy. However, to develop complementary policies that efficiently target such no-cost opportunities, policymakers need better information than currently exists regarding the specific market failures that bring about those opportunities.
    Date: 2007–03–23
  13. By: André de Palma (University of Cergy-Pontoise (THEMA),and Ecole Polytechnique); Jean-Luc Prigent (University of Cergy-Pontoise (THEMA))
    Abstract: This paper introduces a financial hedging model for global environment risks. Our approach is based on portfolio insurance under hedging constraints. Investors are assumed to maximize their expected utilities defined on financial and environmental asset values. The optimal investment is determined for quite general utility functions and hedging constraints. In particular, our results suggest how to introduce derivative assets written on the environmental asset.
    Keywords: utility maximization, hedging, environmental asset, martingale theory
    JEL: C6 G11 G24 L10
    Date: 2007

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