New Economics Papers
on Agricultural Economics
Issue of 2008‒01‒26
fourteen papers chosen by

  2. Estimating the Future Economic Impact of Corn Ethanol Production in the U.S. By Swenson, David A.
  4. Single Payments of the CAP: Where Do the Rents Go? By Stefan Kilian; Klaus Salhofer
  6. Deforestation, Growth and Agglomeration Effects: Evidence from Agriculture in the Brazilian Amazon By Ben Groom; Pauline Grosjean; Andreas Kontoleon; Tim Swanson; Shiqiu Zhang
  7. Finding missing markets (and a disturbing epilogue) : evidence from an export crop adoption and marketing intervention in Kenya By Karlan, Dean; Gine, Xavier; Ashraf, Nava
  9. Locational Determinants of Rural Non-Agricultural Employment: Evidence from Brazil By Jonasson, Erik; Helfand, Steven
  11. The Economic Impact of Ethanol Production in Iowa By Swenson, David A.
  13. Private Sector participation and Regulatory Reform in Water Supply: The Southern Mediterranean Experience By Edouard Pérard
  14. A note on the consequences of an endogenous discounting depending on the environmental quality By Katheline Schubert; Alain Ayong Le Kama

  1. By: Priya BHAGOWALIA; Susan E. CHEN; Gerald SHIVELY (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: Most developing countries strive to improve agricultural productivity by relaxing credit constraints, supplying better inputs, and improving marketing and distribution. However the efficacy of these reforms needs to be examined in the context of the behavioral responses of farming households. This study examines gender biases within households that affect short-term decisions with immediate and long-term implications. This study utilizes data from ICRISAT's village level studies in India (1975-85) to highlight the effects of child gender on the use of agricultural inputs. The main finding is that households with boys tend to use purchased inputs such as fertilizers and insecticides more intensively compared with households with girls. In general, household with boys also tend to have larger land holdings, and use animal and human labor to a greater extent than household with girls.
    Keywords: gender bias, agricultural economics, inputs, village level studies, son
    JEL: J16 Q12
    Date: 2007
  2. By: Swenson, David A.
    Abstract: This brief exercise assesses the potential economic impact value of ethanol production comparing current, 2007, estimates with a future level of production for 2016 and a long run equilibrium level (LRE) for 2025. The values for this estimate are driven by current Food and Agricultural Policy Research Institute (FAPRI) forecasts of corn and ethanol production. All of the estimates assume corn ethanol production only. No other kind of ethanol production is measured nor should be implied. By 2016, nearly 9,000 U.S. jobs will be directly linked to ethanol production, supporting in total nearly 47,200 jobs in the whole economy, given the assumptions in the analysis.
    JEL: L6
    Date: 2008–01–18
  3. By: Allan W. GRAY Author-X-Name-First:Allan; Michael D. BOEHLJE (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: Farming is in the midst of a major transformation—not only in technology and production practices, but also in size of business, resource (land) control and operation, business model and linkages with buyers and suppliers. This paper describes the fundamental drivers of today’s structural change in U.S. agriculture. The impact of the drivers are illustrated by describing some illustrations of the kinds of innovative farming operations that are developing in agriculture, not the typical farms but those who appear to be leading and shaping the new agriculture. Finally, farm policy implications of the transformation of farming to an industrial manufacturing model are discussed.
    Keywords: Farm policy, industrialization of agriculture, structural change, biological manufacturing
    JEL: Q18
    Date: 2007
  4. By: Stefan Kilian; Klaus Salhofer (Environmental Economics and Agricultural Policy Group, Technical University of Munich)
    Abstract: Based on a simple graphical model we analyze the effects of the introduction of the single payment scheme (SPS) in the EU in 2003 on land prices and the distribution of rents. In particular, we are interested in if the single payments are capitalized into agricultural land values. All three different ways to implement the SPS are discussed: the historical model, the regional model and the hybrid model. We show that the outcome crucially depends on the proportion of agricultural area to entitlements and which model is in place.
    Keywords: single payments, CAP, decoupling, agricultural land prices
    Date: 2007
  5. By: Adela NISTOR; Raymond J.G.M. FLORAX; Jess LOWENBERG-DEBOER; Jason P. BROWN (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: This paper shows that spatial panel data models can be successfully applied to an econometric analysis of farm-scale precision agriculture data. The application focuses on the estimation of the effect of controlled drainage water management equipment on corn yields. Using field-level precision agriculture data and spatial panel techniques, the yield response equation is estimated using the spatial autoregressive error random effects model with temporal heterogeneity, incorporating spatial dependence in the error term, while controlling for the topography, weather and the controlled drainage treatment. Controlling for random effects allows for the disentanglement of the effects of spatial dependence from spatial heterogeneity and omitted variables, and thus, to properly investigate the yield response. The results show that controlled drainage has a statistically significant effect on corn yields. The effect is generally positive but varies widely from year to year and field-to-field. For the two years of data controlled drainage was linked to a 2.2% increase in field average yield, but that varied from a -2.6% to a +6.5%. Evaluated at mean elevation and slope in the east part of the field, controlled drainage is associated with 10 bu/a increase and a 0.6 bu/a decrease in yields in 2005 and 2006, respectively. In the West part of the field, controlled drainage is associated with a 11 bu/a increase in 2006 and 2.81 bu/a decrease in 2005.
    Keywords: Manufactured Housing; corn, drainage, precision agriculture, spatial panel model
    JEL: O18 Q18 R15 R38 R58
    Date: 2008
  6. By: Ben Groom (Department of Economics, School of Oriental and African Studies, Thornhaugh St, Russell Square, London WC1H 0XG); Pauline Grosjean; Andreas Kontoleon; Tim Swanson; Shiqiu Zhang
    Abstract: The link between local institutional and market failures, rural poverty and environmental degradation suggests a win-win policy intervention: solve local ?constraints and achieve both poverty alleviation and environmental goals. However, designing such interventions is problematic since exposure to constraints is unobservable and responses can be heterogeneous. In this context we evaluate the ability of the world's largest land set-aside programme, the Sloping Lands Conversion Programme (SLCP) in China, to relax local constraints on off-farm labour markets and achieve these dual objectives. A farm household model in the presence of constraints is developed. This identi?es constrained and unconstrained households and predicts that the impact of the SLCP on off-farm labour supply will be larger for the former if constraints are relaxed. To test this, a novel empirical approach is employed which combines a switching regression with difference in differences. Applied to panel data, these features allow unobserved sample separation, into constrained and unconstrained households, and consistent estimation of the SLCP?s heterogeneous impact. Also identified is the impact on the probability of being constrained and the relative importance of constraints such as tenure security. We ?nd some mixed support for the win-win hypothesis in the case of the SLCP.
    Keywords: Off-farm labour supply, institutional and market failures, local separability, Sloping Lands Conversion Programme (SLCP), difference in differences, switching regression
    JEL: C33 J22 O22
    Date: 2008
  7. By: Karlan, Dean; Gine, Xavier; Ashraf, Nava
    Abstract: In much of the developing world, many farmers grow crops for local or personal consumption despite export options that appear to be more profitable. Thus many conjecture that one or several markets are missing. This paper reports on a randomized controlled trial conducted by DrumNet in Kenya that attempts to help farmers adopt and market export crops. DrumNet provides smallholder farmers with information about how to switch to export crops, makes in-kind loans for the purchase of the agricultural inputs, and provides marketing services by facilitating the transaction with exporters. The experimental evaluation design randomly assigns pre-existing farmer self-help groups to one of three groups: (1) a treatment group that receives all DrumNet services, (2) a treatment group that receives all DrumNet services except credit, or (3) a control group. After one year, DrumNet services led to an increase in production of export oriented crops and lower marketing costs; this translated into household income gains for new adopters. However, one year after the study ended, the exporter refused to continue buying the cash crops from the farmers because the conditions of the farms did not satisfy European export requirements. DrumNet collapsed in this region as farmers were forced to sell to middlemen and defaulted on their loans. The risk of such events may explain, at least partly, why many seemingly more profitable export crops are not adopted.
    Keywords: Crops & Crop Management Systems,Access to Finance,,Economic Theory & Research,Banks & Banking Reform
    Date: 2008–01–01
  8. By: Maud ROUCAN-KANE; Whitney O. PEAKE (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: Although the marketing mix has been covered in great detail in many veins of literature, very little information exists regarding the mix of marketing tools within the agriculture industry serving U.S. agricultural producers. Using a survey conducted by AgriMarketing magazine in June 2006, a two-fold analysis is undertaken. This study attempts to determine the differences in the use of marketing tools by industry and simple regression analysis is conducted to determine promotional factors that produce a significant impact on sales. Both mass media and other promotional tools were found to be the most consistently significant factor impacting sales of firms in the study.
    Keywords: marketing mix, agribusiness, promotion, agriculture, marketing, mass media. expenditures
    JEL: Q13 C20
    Date: 2007
  9. By: Jonasson, Erik (Department of Economics, Lund University); Helfand, Steven (University of California, Riverside)
    Abstract: By paying particular attention to the local economic context, this paper analyzes the determinants of non-agricultural employment and earnings in non-agricultural jobs. The empirical analysis is based on the Brazilian Demographic Census, allowing for disaggregated controls for the local economy. Education stands out as one of the key determinants of employment outcome and earnings potential. Failure to control for locational effects, however, can lead to biased estimation of the importance of individual and household-specific characteristics. The empirical results show that local market size and distance to population centers have a significant impact on non-agricultural employment prospects and earnings.
    Keywords: rural non-agricultural employment; economic geography; Latin America; Brazil
    JEL: J31 O12 O15 O18
    Date: 2008–01–17
  10. By: Maud ROUCAN-KANE; Roman KEENEY (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: In addition to farm work, most farm households in developed countries have at least one person working off-farm. The purpose of this paper is to examine if, and how, government payments, personal characteristics and household characteristics affect labor allocation of farm operators and their spouses, and the decisions to hire labor. We estimate an 8-regime multinomial logit model and a three equation multivariate probit model to quantify these impacts. Results indicate that age of household members is consistent with the life-cycle hypothesis on increasing then decreasing labor market par, and is positively associated with demand for hired labor. Hired farm labor and off farm activities increase with the operator education levels. As household size increases, a household member is more likely to work off the farm. Increasing net worth is found to have a positive impact on probability of spouses working on the farm as well as hired labor being used. Both coupled and decoupled payments increase demand for hired labor which is consistent both with farm expansion and reduced family labor time on the farm.
    Keywords: government subsidies, government programs, time allocation, labor allocation, off-farm labor, farm labor, hired labor
    JEL: J22 Q12 Q18
    Date: 2007
  11. By: Swenson, David A.
    Abstract: Iowa is the center of an ethanol production boom in the Midwest. The overall impact of that expansion is substantial and quite discernible, especially among the many communities in which plants are locating. In the year 2000, about 180 million bushels of Iowa corn were processed into ethanol. By 2005 that amount had grown to more than 400 bushels million bushels – an expansion of 122 percent. Iowa’s processing capacity is now closing in on 800 million bushels of Iowa corn into ethanol. The industry is growing very rapidly. This report documents the job economic impact of ethanol industrial production for 2007.
    JEL: H0
    Date: 2008–01–18
  12. By: Maud ROUCAN-KANE; David UBILAVA; Pei XU (Department of Agricultural Economics, College of Agriculture, Purdue University)
    Abstract: The objective of this paper is to determine how the firm's infrastructure, the financial characteristics of a company (net income, sales), and the organizational structure (number of acquisitions, age of establishment of the firm) affect R&D investments in the agricultural sector. We use data for companies under the SIC codes for agricultural chemicals, and crop planning and protection. The results based on analysis of 69 observations of 12 firms revealed that firm's financial and organizational infrastructure does affect its R&D expenditures. Older and larger firms tend to spend more on R&D. During the last 17 years the R&D expenditures with respect to the sales of the company have been reduced. Finally, contrary to the expectations, previous year's profit margins are negatively correlated with the R&D over the sales ratio of the following year.
    Keywords: Manufactured Housing; R&D, agriculture, chemicals, crop planning, crop protection, agribusiness, expenditures
    JEL: A10 O32 Q16
    Date: 2007
  13. By: Edouard Pérard
    Abstract: The southern Mediterranean region faces one of the most important water crises in the world. The combination of aridity, foreign dependency, climate change, misallocation of the resources and escalating human demand make water supply a primary issue for health, economy and poverty reduction. In this context, institutional reform of the water supply sector is of great interest. Thus, the aim of this study is to examine the water regulatory framework in southern Mediterranean countries and the development of private sector participation in the context of water crisis. The first part of the study presents the scope of private sector participation in water supply and its different forms around the world. An extensive review of 22 empirical tests and 48 case studies on the effect of private sector participation in water services has been conducted. This survey shows that private sector participation, per se, in water supply does not systematically lead to gains in efficiency. Reforming the institutional framework is an essential prerequisite for delegating water services. Afterward, the paper focuses on the southern Mediterranean region. It compares institutional arrangements, recent regulatory reforms and experiences with private sector participation in water infrastructure in Algeria, Egypt, Jordan, Morocco and Tunisia... <BR>La région Méditerranéenne fait face à l’une des crises les plus importantes au monde en matière de gestion des ressources en eau. L’aridité, les problèmes géopolitiques, les questions d’allocation de la ressource, la croissance de la demande et les changements climatiques font de l’eau un problème central pour la santé, l’économie et la réduction de la pauvreté. Dans ces circonstances, la réforme institutionnelle du secteur est de toute première importance. Le but de ce papier est donc d’étudier le cadre institutionnel du secteur de l’eau et le développement de la participation du secteur privé dans le contexte de crise que connaît la région Méditerranéenne. La première partie de cette étude présente l’étendue et les différentes formes de participation du secteur privé dans la gestion des infrastructures d’eau dans le monde. La revue de 22 tests empiriques et de 48 études de cas montre que la participation du secteur privé dans les services d’eau ne conduit pas systématiquement à un gain d’efficacité. La réforme du cadre institutionnel apparaît comme étant un pré requis essentiel à toute opération de privatisation/délégation. Le papier se concentre ensuite sur la région Méditerranéenne et compare les arrangements institutionnels, les récentes réformes réglementaires et les diverses expériences en matière de délégation des services d’eau en Algérie, en Egypte, en Jordanie, au Maroc et en Tunisie...
    Date: 2008–01
  14. By: Katheline Schubert (Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Alain Ayong Le Kama (Université de Lille - Université de Lille 1)
    Abstract: Our intention is to study, in the framework of a very simple optimal growth model, the consequences on the optimal paths followed by consumption and the environmental quality of an endogenous discounting. Consumption directly comes from the use of environmental services and so is a direct cause of environmental degradation. The environment is valued both as a source of consumption and as an amenity. For a sustainability concern, we introduce an endogenous discount rate growing with the environmental quality, and compare the optimal growth paths with the ones obtained in the usual case of exogenous and constant discounting. We show that the convergence of the environmental quality towards a steady state occurs only for a very special configuration of the parameters in the exogenous discounting case, while it occurs generically in the endogenous discounting one. This happens for a utility discount rate becoming suficiently high when the environmental quality is high and suficiently low when the environmental quality is poor. In this case then, endogenous discounting with a positive marginal discount rate allows us to avoid the depletion of the environment.
    Keywords: Endogenous discounting, Sustainability, Environment
    Date: 2007–04

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