New Economics Papers
on Agricultural Economics
Issue of 2007‒11‒10
sixteen papers chosen by

  1. What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions By Ruben N. Lubowski; Andrew J. Plantinga; Robert N. Stavins
  2. The Value of Native Biodiversity Enhancement in New Zealand: A Case Study of the Greater Wellington Area By Pamela Kaval; Richard Yao; Terry Parminter
  3. Decoupled Farm Payments and the Role of Base Updating Under Uncertainty By Bhaskar, Arathi; Beghin, John C.
  4. Market Power Effects of Supply Control and Dairy Market Deregulation By Jonsson, Thomas
  5. The Signaling Function of an Extra-floral Display: What Selects for Signal Development? By Tamar Keasar; Adi Sadeh; Avi Shmida
  6. Are Pollution Permits a Cure for Unregulated Growth Diseases ? By Alain Jean-Marie; Philippe Fabien Prieur; Philippe Mabel Tidball
  7. Designing Water Markets to Manage Coupled Externalities : a Preliminary Analysis By Sophie Legras; Robert Lifran
  8. Models for Non-Exclusive Multinomial Choice, with Application to Indonesian Rural Households By Christopher L. Gilbert; Francesca Modena
  9. Have we been Mugged? Market Power in the World Coffee Industry By Christopher L. Gilbert
  10. Designs Efficiency for Non-market Valuation with Choice Modelling: How to Measure It, What to Report and Why By John M. Rose; Riccardo Scarpa
  12. The Tariff Equivalent and Forgone Trade Effects of Prohibitive Technical Barriers to Trade By Yue, Chengyan; Beghin, John C.
  13. International Financial Volatility and Commodity Exports: Evidence from the Thai Agricultural Sector By Justin B. May
  14. Environmental Law and Policy By Richard L. Revesz; Robert Stavins
  15. Water Demand Under Alternative Price Structures By Sheila Olmstead; W. Michael Hanemann; Robert N. Stavins
  16. Environmental Economics By Robert N. Stavins

  1. By: Ruben N. Lubowski; Andrew J. Plantinga; Robert N. Stavins
    Abstract: Land-use changes involve important economic and environmental effects with implications for international trade, global climate change, wildlife, and other policy issues. We use an econometric model to identify factors driving land-use change in the United States between 1982 and 1997. We quantify the effects of net returns to alternative land uses on private landowners' decisions to allocate land among six major uses, drawing on detailed micro-data on land use and land quality that are comprehensive of the contiguous U.S. This analysis provides the first evidence of the relative historical importance of markets and Federal farm policies affecting land-use changes nationally.
    JEL: Q1 Q15 Q23 Q24
    Date: 2007–11
  2. By: Pamela Kaval (University of Waikato); Richard Yao; Terry Parminter
    Abstract: New Zealand’s biodiversity consists of over 80,000 native plants, animals and fungi, many of which are indigenous and located on private property. To enhance native biodiversity and discourage activities that may deplete it, policies can be introduced that can encourage individual self-interest to coincide with social interest. Economic values for biodiversity can help to determine the best policy tools to use. In this project, we surveyed Greater Wellington Region households to determine their biodiversity enhancement values using the contingent valuation approach. Greater Wellington respondents placed a significant value on both private land biodiversity as well as public land biodiversity.
    Keywords: biodiversity; non-market valuation; native species; private landholders; New Zealand
    JEL: Q56 Q57 Q51
    Date: 2007–11–06
  3. By: Bhaskar, Arathi; Beghin, John C.
    Abstract: In the context of the U.S farm policy, this paper analyzes the effect that expectations about base updating in future policies have on a farmer’s acreage decision in the presence of price, yield and policy uncertainty. We consider a risk neutral farmer producing a single crop whose income consists of market revenue and government payments. We consider two policy regimes. Decisions made in the current policy regime are linked to government payments in the future policy regime through the possibility of a base update in the future regime. There is policy uncertainty about the possibility of a base update being allowed in the future. We combine stochastic dynamic programming with present value calculations to link current acreage decisions to future program payments. The average optimal planted acreage is weakly increasing in the subjective probability of the future base update. The maximum percentage increase in the average optimal planted acreage is 6%.
    Keywords: decoupling, decoupled payment, base update, expectation, direct payment, countercyclical payments, farm bill
    JEL: Q1
    Date: 2007–10–29
  4. By: Jonsson, Thomas (Department of Economics, Umeå University)
    Abstract: This paper uses the Bresnahan-Lau framework to analyze whether policy reforms specifically affecting Swedish dairy cooperatives, i.e. the two-price system (an input quota, 1986-1991) and the general deregulation of dairy policy (1991-1994), had any market power effects on the Swedish butter market. It is hypothesized that the two-price system enhanced market power, while the deregulation, making exports of butter less profitable, led to a lower level of market power exercised by dairy cooperatives. To account for non-stationary variables, a dynamic error correction model is adopted. The results show that the null hypotheses of no market power effect, for either of the two reforms, cannot be rejected at any reasonable significance level.
    Keywords: agricultural policy; cooperatives; market power
    JEL: L22 L51 L66 Q11 Q18
    Date: 2007–11–02
  5. By: Tamar Keasar; Adi Sadeh; Avi Shmida
    Abstract: The vertical inflorescences of the Mediterranean annual Salvia viridis carry many small, colorful flowers, and are frequently terminated by a conspicuous tuft of colorful leaves ("flags") that attracts insect pollinators. Insects may use the flags as indicators of the food reward in the inflorescences, as long-distance cues for locating and choosing flowering patches, or both. Clipping of flags from patches of inflorescences in the field significantly reduced the number of pollinators that arrived at the patches, but not the total number of inflorescences and flowers visited by them. The number of flowers visited per inflorescence significantly increased with inflorescence size, however. Inflorescence and flower visits rates signific antly increased with patch size when flags were present, but not after flag removal. 6% of the plants in the study population did not develop any flag during blooming, yet suffered no reduction in seed set as compared to flag-bearing neighboring individuals. These results suggest that flags signal long-distance information to pollinators (perhaps indicating patch location or size), while flower-related cues may indicate inflorescence quality. Plants that do not develop flags probably benefit from the flag signals displayed by their neighbors, without bearing the costs of flag production. Thus, flagproducing plants can be viewed as altruists that enhance their neighbors' fitness. Greenhouse-grown S. viridis plants allocated = 0.5% of their biomass to flag production, and plants grown under water stress did not reduce their biomass allocation to flags as compared to irrigated controls. These findings suggest that the expenses of flag production are modest, perhaps reducing the cost of altruism. We discuss additional potential evolutionary mechanisms that may select for the maintenance of flag production.
    Date: 2007–11
  6. By: Alain Jean-Marie; Philippe Fabien Prieur; Philippe Mabel Tidball
    Abstract: We consider an OLG model with emissions arising from production and potential irreversible pollution. Pollution control goes through a system of permits and private agents can also maintain the environment. In this setting, we prove that there exist multiple equilibria. Due to the possible irreversibility of pollution, the economy can be dragged into both environmental and poverty traps. First, we show that choosing a global quota on emissions at the lowest level beyond a critical threshold is a means to avoid the two types of traps. Next, we analyze the impact of a political reform on other equilibria. When the agents do not engage in maintenance, a fall in the quota implies a reduction of pollution but is detrimental to capital accumulation while, in the other case, it procures a double dividend.
    Date: 2007–10
  7. By: Sophie Legras; Robert Lifran
    Abstract: This paper aims to investigate different water market designs to accommodate coupled externalities in the context of irrigation-induced salinity. It provides a preliminary analysis of three types of market mechanisms, involving diversion rights and recharge rights.
    Date: 2006–11
  8. By: Christopher L. Gilbert; Francesca Modena
    Abstract: Textbook discussions of discrete choice modelling focus on binomial and multinomial choice models in which agents select a single response. We consider the situation of non-exclusive multinomial choice. The widely used Marginal Logit Model imposes independence and has other disadvantages. We propose two models which account for non-exclusive and dependent multiple responses and require at least one response. In the first and simpler specification, the Poisson-multinomial, households first choose the number of responses to a specific shock, and then the specific choices are identified to maximize household utility conditional on the former choice. The second specification, the threshold-multinomial, generalizes the standard multinomial logit model by supposing that agents will choose more than one response if the utility they derive from other choices is “close” to that of the utility-maximizing choice. We apply these two approaches to reported responses of rural Indonesian rural households to demographic and economic shocks.
    Keywords: Discrete choice models, Marginal logit, Shocks, Risk coping strategies
    JEL: C25 C51 O12
    Date: 2007
  9. By: Christopher L. Gilbert
    Abstract: The coffee industry is highly concentrated both at the retail and export stages. A number of recent commentaries have suggested that this concentration translates into monopolistic and monopsonistic pricing to the detriment of both consumers and farmers. Using time series data for eight major coffee-consuming countries and nine coffee exporters, we find that both retail and export markets have increased in competitiveness over recent decades. Retail markets in traditional coffee-consuming countries are close to being fully competitive but there is evidence of exercise of monopoly power in the non-traditional Japan and UK markets. On the export side, market liberalization has reduced the exercise of monopsony power in most, but not all, exporting countries.
    Date: 2007
  10. By: John M. Rose (ITLS -- University of Sydney); Riccardo Scarpa (University of Waikato)
    Abstract: We review the basic principles for the evaluation of design efficiency in discrete choice modelling with a focus on efficiency of WTP estimates from the multinomial logit model. The discussion is developed under the realistic assumption that researchers can plausibly define a prior on the utility coefficients. Some new measures of design performance in applied studies are proposed and their rationale discussed. An empirical example based on the generation and comparison of fifteen separate designs from a common set of assumptions illustrates the relevant considerations to the context of non-market valuation, with particular emphasis placed on C-efficiency. Conclusions are drawn for the practice of reporting in non-market valuation and for future work on design research.
    Keywords: experimental design; multinomial logit; willingness to pay; choice modelling; C-efficiency
    JEL: C25 Q51
    Date: 2007–10–31
  11. By: Katrin Rehdanz (Research unit Sustainability and Global Change, Hamburg University)
    Abstract: Economic valuation of biodiversity is generally carried out by applying revealed or stated preference approaches to determine people’s willingness to pay for small changes in management options. Studies on species preservation investigating passive or nonuse values typically rely on stated preference methods such as the contingent valuation approach and often focus on single animal species. The total value of species preservation can only be derived by aggregating the various values. This paper proposes a different approach by investigating country level data on life-satisfaction attempting to explain differences in subjective well-being by reference to amongst other things species diversity. While most recent papers have concentrated on finding determinants of life-satisfaction other than income, little attention has been drawn to spatial interdependencies. Most researchers investigating the determinants of life-satisfaction implicitly assume that subjective well-being is unaffected by events in neighbouring locations. The existence of spatial relationships in the data has implications for the econometric techniques typically employed including misleading inference testing procedures, bias and inconsistency depending on the precise form of the spatial relationship. We extend our analysis by a spatial econometric approach investigating whether and to what extend spatial relationships exist. Spatially weighted variables are shown to be a highly significant determinant of life-satisfaction. As nature does not respect man-made borders, neither does peoples happiness. Furthermore, even when controlling for a range of other factors we find a significant relationship with species diversity; the higher a countries number of bird or mammal species or the lower the percentage of bird species threatened the more satisfied the people are. Overall and from a human perspective, bird species seem to be a better indicator for biodiversity.
    Keywords: amenity value, biodiversity, life-satisfaction, spatial econometrics, species diversity, well-being
    JEL: R19 Q57
    Date: 2007–10
  12. By: Yue, Chengyan; Beghin, John C.
    Abstract: We derive a method to econometrically estimate the tariff equivalent and foregone trade effects of a prohibitive technical barrier to trade (TBT) based on Wales and Woodland’s Kuhn-Tucker approach to corner solutions in consumer choice. The method overcomes the lack of observed data on bilateral trade flows and accounts for differentiated goods by place of origin. We apply the derived random utility model to international trade in apples to identify the tariff equivalent of prohibitive nontariff trade barriers imposed by Australia on potential imports of New Zealand apples. We estimate the forgone apple trade between the two countries, the implied trade injury imposed by Australia on New Zealand, and the welfare loss to Australia. The removal of the TBTs would induce net welfare gains around US$50 million annually for Australia.
    Keywords: Corner solution, Kuhn-Tucker model, New Zealand apples, nontariff barrier, Australian technical barrier to trade, prohibitive, tariff equivalent TBT, NTB
    JEL: F1
    Date: 2007–10–30
  13. By: Justin B. May (Department of Economics, College of William and Mary)
    Abstract: While the demise of many tightly-managed exchange rate regimes has meant that exchange rate volatility has risen for most developing countries in the past few decades, there exists little consensus on the ramifications of that volatility for real sectoral performance. Using production and export data from the Bank of Thailand, this paper measures the effect of real exchange rate volatility on Thai production and export of five key agricultural commodities. I measure volatility as the moving average standard deviation of the daily real value of the baht, the residual of an ARMA(5,4) process of the monthly real value of the baht, the residual of an ARIMA(2,1,3) process of the daily real value of the baht, and as the conditional time variance of the GARCH(2,1) process of the monthly real value of the baht. I then estimate the effects of real currency fluctuations across the agricultural sectors, controlling for both the level of the real exchange rate and foreign incomes. Point estimates of the effect of real exchange rate volatility on the volume of exports are consistently negative and often statistically significant lending support to a range of theoretical models that predict such an effect. Further, I find no significant relationship between production and lagged values of real exchange rate volatility and the control variables, suggesting that volatility is not an important determinant of agricultural supply. These results are robust to the choice of any of the measures of volatility considered here.
    Keywords: Agriculture, Exchange Rate Volatility, Exports, Thailand, Trade
    JEL: F14 O13 O24
    Date: 2007–10–31
  14. By: Richard L. Revesz; Robert Stavins
    Abstract: This chapter for the Handbook of Law and Economics provides an economic perspective of environmental law and policy. We examine the ends of environmental policy, that is, the setting of goals and targets, beginning with normative issues, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. We examine this analytical method in detail, including its theoretical foundations and empirical methods of estimation of compliance costs and environmental benefits. We review critiques of benefit-cost analysis, and examine alternative approaches to analyzing the goals of environmental policies. <br><br>We examine the means of environmental policy, that is, the choice of specific policy instruments, beginning with an examination of potential criteria for assessing alternative instruments, with particular focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional, command-and-control mechanisms, market-based instruments, and liability rules. Three cross-cutting issues receive attention: uncertainty; technological change; and distributional considerations. We identify normative lessons in regard to design, implementation, and the identification of new applications, and we examine positive issues: the historical dominance of command-and-control; the prevalence in new proposals of tradeable permits allocated without charge; and the relatively recent increase in attention given to market-based instruments. <br><br>We also examine the question of how environmental responsibility is and should be allocated among the various levels of government. We provide a positive review of the responsibilities of Federal, state, and local levels of government in the environmental realm, plus a normative assessment of this allocation of regulatory responsibility. We focus on three arguments that have been made for Federal environmental regulation: competition among political jurisdictions and the race to the bottom; transboundary environmental problems; and public choice and systematic bias.
    JEL: K32 Q28 Q38 Q48
    Date: 2007–11
  15. By: Sheila Olmstead; W. Michael Hanemann; Robert N. Stavins
    Abstract: We estimate the price elasticity of water demand with household-level data, structurally modeling the piecewise-linear budget constraints imposed by increasing-block pricing. We develop a mathematical expression for the unconditional price elasticity of demand under increasing-block prices and compare conditional and unconditional elasticities analytically and empirically. We test the hypothesis that price elasticity may depend on price structure, beyond technical differences in elasticity concepts. Due to the possibility of endogenous utility price structure choice, observed differences in elasticity across price structures may be due either to a behavioral response to price structure, or to underlying heterogeneity among water utility service areas.
    JEL: D12 L95 Q21 Q25 Q28
    Date: 2007–11
  16. By: Robert N. Stavins
    Abstract: This article provides an overview of the economics of environmental policy, including the setting of goals and targets, notably the Kaldor-Hicks criterion and the related method of assessment known as benefit-cost analysis. Also reviewed are the means of environmental policy, that is, the choice of specific policy instruments, featuring an examination of potential criteria for assessing alternative instruments, with focus on cost-effectiveness. The theoretical foundations and experiential highlights of individual instruments are reviewed, including conventional command-and-control mechanisms and market-based instruments.
    JEL: K32 Q28 Q38 Q48
    Date: 2007–11

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