New Economics Papers
on Agricultural Economics
Issue of 2008‒07‒20
fourteen papers chosen by

  1. Water, Water Somewhere: The Value of Water in a Drought-Prone Farming Region By Arthur Grimes; Andrew Aitken
  2. Modelling of Agricultural Behavior under the CAP Regime: Assessment of Environmental Impacts and Policy Effectiveness By Constadina Passa; Anastasios Xepapadeas
  3. Modelling of Agricultural Behavior under the CAP Regime: Policy Effectiveness and Design By Constadina Passa; Anastasios Xepapadeas
  4. Brand Agriculture and Economic Geography: A General Equilibrium Analysis By Masahisa Fujita; Nobuaki Hamaguchi
  5. Does Mandatory Labeling of Genetically Modified Food Grant Consumers the Right to Know? Evidence from an Economic Experiment By Dannenberg, Astrid; Scatasta, Sara; Sturm, Bodo
  6. The EU and Asia: World Trade Liberalisation and the Evolution of Agricultural Product Flows By M. Bruna Zolin
  7. Nutrient Trading in Lake Rotorua: Overview of a Prototype System By Kelly Lock; Suzi Kerr
  8. Rapid urbanization, employment crisis and poverty in African LDCs:A new development strategy and aid policy By Herrmann, Michael; Khan, Haider
  9. International commodity prices and the persistence of civil conflict By T. DEMUYNCK; A. SCHOLLAERT
  10. Fixing Market Failures or Fixing Elections? Agricultural Credit in India By Shawn A. Cole
  11. Environmental Concern and Rational Production, Consumption and Rehabilitation By Levy, Amnon
  12. An application of the Precautionary Principle under ambiguity: the impact of the MOSE system on harbour activity in the Venice By Fulvio Fontini; Georg Umgiesser; Lucia Vergano
  13. The Economics of Endangered Species Poaching By Brant Abbott
  14. Auctioning Wind Power Sites when Environmental Quality Matters By Gervasio Ciaccia; Nicola Doni; Fulvio Fontini

  1. By: Arthur Grimes (Motu Economic and Public Policy Research); Andrew Aitken (Motu Economic and Public Policy Research)
    Abstract: Water is critical for agriculture, yet surprisingly few studies internationally have analysed the value placed on water in specific farming contexts. We do so using a rich longitudinal dataset for the Mackenzie District (Canterbury, New Zealand) over nineteen years, enabling us to extract the value placed by farmers on long-term access to irrigated water. New Zealand has a system of water consents under the Resource Management Act (RMA) that enables farmers with consents to extract specified quantities of water for agricultural purposes. Some water is extracted through large-scale irrigation infrastructure and other flows by more localised means; the RMA and the water consents themselves are a critical legal infrastructure underpinning farming. Using panel methods, we estimate property sale price and assessed value as a function of the size of the farm's water right (if it has one), farm characteristics, and the water right interacted with farm characteristics to determine how the value of a water consent varies according to local conditions. We find that flatter areas and areas with poorly draining soils benefit most from irrigation, possibly because the water is retained for longer on these properties. Drier areas appear to benefit more from irrigation than do areas with higher rainfall. Farms that are situated close to towns derive especially strong benefits from irrigation since these properties are most likely to have potential water-intensive land uses such as dairying and cropping that require access to processing facilities and/or an urban labour pool.
    Keywords: irrigation, hedonics, water supply, New Zealand
    JEL: Q15 Q25 Q12 D23 D24
    Date: 2008–06
  2. By: Constadina Passa (Department of Economics, University of Crete, Greece); Anastasios Xepapadeas (Department of Economics, University of Crete, Greece)
    Abstract: The structure of farming activity under the provisions of the generalized regime of the Common Agricultural Policy involving both the first and second pillar elements is modelled. Independently of whether regulated agents exhibit unbounded or bounded rationality, the impact of the different type of CAP measures, as prescribed by Agenda 2000, in the decision making - and thus on the environmental performance of a homogeneous population of farmers - are discussed. The problem of a representative farmer is used for this purpose. After assessing the environmental effectiveness of the various CAP regimes, the mechanism that provides the type of CAP instruments that safeguard the collective attainment of a social environmental target, along with the type of interdependence characterizing them, is defined under the analytical framework of unboundedly and boundedly rational agents respectively. The problem of the optimal regulation of an unboundedly rational population of farmers is discussed in both a static and a dynamic context. The long-run viability of the Agenda 2000 CAP reform is also examined under the assumption of bounded rationality by employing the evolutionary framework of replicator dynamics.
    Keywords: Environmental impacts, coupling, decoupling, production subsidy, direct payment, cross-compliance principle, rural development subsidy.
    JEL: Q18 Q51
    Date: 2007–12–10
  3. By: Constadina Passa (Department of Economics, University of Crete, Greece); Anastasios Xepapadeas (Department of Economics, University of Crete, Greece)
    Abstract: The paper discusses the design of optimal regulatory policies under an alternative analytical framework of unbounded and bounded rationality, by considering the mechanism that provides the type of the optimal CAP instruments that ensure the collective attainment of a social environmental target, along with the type of interdependence characterizing them. The problem of the optimal regulation of an unboundedly rational population of farmers is discussed in both a static and a dynamic context. The long-run viability of the Agenda 2000 CAP reform is also examined under the assumption of bounded rationality by employing the evolutionary framework of replicator dynamics. Analysis indicated may be socially desirable on environmental grounds not only to maintain coupled payments but also to impose on farmers a set of charges on the various aspects of farming activity.
    Keywords: production subsidy, direct payment, cross-compliance principle, optimal regulation, unbounded rationality, bounded rationality, replicator dynamics.
    JEL: Q18 B52 L51
    Date: 2007–12–10
  4. By: Masahisa Fujita (Konan University and Research Institute of Economy, Trade and Industry (RIETI)); Nobuaki Hamaguchi (Research Institute for Economics and Business Administration, Kobe University)
    Abstract: This paper presents a general equilibrium model of NEG incorporating the brand agriculture which produces differentiated agricultural products. Focusing on the core-periphery space, we show that highly differentiated brand agriculture can be sustained in the periphery even when the accessibility of the core market is not particulary good. This result gives support for promoting innovation in rural area in order to avoid direct price competition in generic commodity market under unfavorable competitive condition.
    Keywords: brand agriculture, NEG, core-periphery
    JEL: O21 Q10 R13
    Date: 2007–10
  5. By: Dannenberg, Astrid; Scatasta, Sara; Sturm, Bodo
    Abstract: Opponents of the voluntary labeling scheme for genetically modified (GM) food products often argue that consumers have the “right to know” and therefore advocate mandatory labeling. In this paper we argue against this line of reasoning. Using experimental auctions conducted with a sample of the resident population of Mannheim, Germany, we show that the quality of the informational signal generated by a mandatory labeling scheme is affected by the number of labels in the market. If there are two labels, one for GM products and one for non-GM products, mandatory and voluntary labeling schemes generate a similar degree of uncertainty about the quality of products that do not carry a label.
    Keywords: labeling, genetically modified foods, consumer preferences, experimental auctions
    JEL: C91 Q18 Q51
    Date: 2008
  6. By: M. Bruna Zolin (Department of Economics, University Of Venice Cà Foscari)
    Abstract: In the trade policy debate, the complete liberalisation of world trade for agricultural products is one of the most relevant issues. European Union is a free trade area where agricultural products are protected and supported from the world market forces, more than any other good or service. The elimination of trade barriers among the EU member states has achieved European self-sufficiency in food and a strong integration in the European market. To resolve international disputes, Mc Sharry, Agenda 2000 and Mid Term Reforms of the CAP were introduced in the last decade, having in mind the reduction of domestic support, tariff barriers and export subsides. In this context, this paper studies the evolution of these trade flows among EU and some selected Asiatic countries. The aim is, on the one hand, to consider the impact of the progressive liberalisation of world agricultural trade in these areas, on the other hand, to measure the integration degree of these groups of countries. In order to be able to study these topics, this paper analyses the evolution of agricultural trade and of the role played by the different product groups. The paper is divided into three sections, followed by some concluding remarks. The first section studies the main agrarian policies adopted in the EU and some selected Asiatic countries. The second section presents the relationships among them. The third describes the agricultural import and export flows, considering the trade from a general perspective, from the point of view of the political decisions adopted and that of the agreements signed.
    Keywords: world trade, agricultural products, Asia and Europe integration
    JEL: Q17 Q18 P52
    Date: 2008
  7. By: Kelly Lock (Motu Economic and Public Policy Research); Suzi Kerr (Motu Economic and Public Policy Research)
    Abstract: Water quality in Lake Rotorua has been declining for at least the last 30 years as increased levels of nutrients have entered the lake. Despite significant effort and expenditure, the level of nutrients entering the lake still exceeds sustainable levels. A nutrient trading system would help the catchment achieve this goal at least cost. Nutrient sources would bear the cost of their impact on water quality and hence take these costs into account in their decision-making. This paper presents a prototype nutrient trading system for achieving cost effective nutrient loss reductions for the Lake Rotorua catchment.
    Keywords: Water quality, nutrients, trading, Lake Rotorua
    JEL: Q53 Q57 Q58
    Date: 2008–05
  8. By: Herrmann, Michael; Khan, Haider
    Abstract: Rapid urbanization is a fact of live even in the least developed countries (LDCs) where the lion’s share of the population presently lives in rural areas and will continue to do so for decades to come. At the turn of the millennium 75% of the LDCs’ population still lived in rural areas and 71% of the LDCs’ labor force was involved in agriculture. But even though the largest share of their population lives in rural areas and directly or indirectly derives their livelihoods from agriculture, a rapidly increasing share of the population migrates to urban centers in search for employment opportunities outside agriculture in industrial enterprises or the services sector. The main purpose of this paper is to examine the causes and consequences -- in particular, the policy implications -- of the ongoing urbanization in the African LDCs. It is found that the employment opportunities in either rural or the urban sector are not growing adequately. This paper attempts to analyze the emerging trends and patterns of urbanization in the African LDCs within a dynamic dual-dual framework with a strong emphasis on rural-urban migration and the informal sectors. The analysis pinpoints, among other things, the need to build up productive capacities in order to create adequate employment and incomes for the rapidly growing population---particularly in the urban areas. The development of productive capacities, which is a precondition for the creation of productive employment opportunities, is a central element of viable poverty reduction strategy for Bangladesh as well. Without significant poverty reduction it is impossible to think of viable urbanization on the basis of sustainable development criteria in this group of very African countries. The donors, especially the OECD/ DAC countries, should provide the necessary financial backing for such a sustainable and equitable development strategy for Africa. It is necessary to reverse the trends in aid, and to provide a much larger share of aid for productive sector development, including the development of rural and urban areas, and the development of agricultural and non-agricultural sectors in line with the perspective of the dual-dual model. Although urban centers mostly host non-agricultural industries, sustainable urbanization also strongly depends on what happens in the agricultural sectors. Productive employment opportunities in rural areas are important in order to combat an unsustainable migration from rural areas to urban centers, and productive employment opportunities in urban centers are essential to absorb the rapidly increasing labor force in the non-agricultural sector.
    Keywords: Urbanization; Africa; LDCs; Dual-Dual Model; Informal Sector; Poverty; Employment; Capabilities.
    JEL: O18 A1 O5 R23 R58 O1 R0 O3 J0 C6 O2 I3 Q1 O55 J60 C3 J3 J4 O4 R11
    Date: 2008–07–08
    Abstract: We develop a general equilibrium model to analyse the impact of the international commodity prices on civil conflict. We focus on the specific labour market context of underdeveloped rural sub-Saharan African areas where highly valuable and easily appropriable natural resources constitute the only alternative economic assets to tropical agricultural commodities. We show that not only the price of mineral resources matters. Prices of tropical agricultural commodities matter just as much: a drop in those prices increases the attractiveness of other ‘economic’ activities such as rebellion/warfare and can, therefore, trigger civil conflict. Furthermore, we show that the occurrence of civil war may carry a non-reversible component within it: due to its destructive nature on agricultural productivity, civil war lowers market wages, thus increasing the mining profits and lowering the threshold mineral prices below which conflict is not lucrative.
    Date: 2008–06
  10. By: Shawn A. Cole (Harvard Business School, Finance Unit)
    Abstract: This paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in non-election years, or in private bank lending. I show capture is costly: elections affect loan repayment, and election year credit booms do not measurably affect agricultural output.
    Date: 2008–07
  11. By: Levy, Amnon (University of Wollongong)
    Abstract: Utility from consumption might be spoiled by the degradation of the environment. The incorporation of a direct dependency of utility on the state of the environment through environmental concern and the incorporation of the effects of production pollution and rehabilitative investment on the environment into a lifetime utility maximization model imply that a minimal degree of impatience is necessary for an interior steady state to exist. This steady state is unique, approachable along a path with damped oscillations of consumption and rehabilitative investment, and characterized by a larger production than in the steady state without environmental concern.
    Keywords: Consumption, environmental investment, golden rule
    JEL: O12 Q56
    Date: 2008
  12. By: Fulvio Fontini (University of Padua); Georg Umgiesser (ISMAR-CNR Venice); Lucia Vergano (University of Padua)
    Abstract: This paper addresses both theoretically and empirically how to deal with ambiguous decisions. We briefly discuss the most relevant decision making criteria under ambiguity proposed in the literature, as specific cases of a general functional based on NEO-capacities. Then we study the impacts on Venetian port activities of MOSE, the dam system aimed to protect the Venice Lagoon from the periodic flooding. We show that the estimated impacts depend crucially on the levels of optimism and pessimism of the decision maker and in particular they substantially di¤er from the ones calculated on the basis of the expected value framework.
    Keywords: Precautionary principle, Ambiguity, MOSE, NEO-Capacity, CEU
    JEL: D81 Q51 Q54
    Date: 2008
  13. By: Brant Abbott
    Keywords: endangered species, poaching, International trade
    JEL: K42 Q56 Q57
    Date: 2008–06
  14. By: Gervasio Ciaccia (Italian Authority for Electricity and Gas (AEEG) and Sapienza University of Rome); Nicola Doni (University of Florence); Fulvio Fontini (University of Padua)
    Abstract: In this work we frame within auction theory an index that allows to order different projects for the construction of onshore wind energy plants and that explicitly takes into account their environmental quality. Wind farm projects are defined as vectors of attributes, encompassed in four categories: the technical properties of each project; its social impact; its environmental impact and the share of earnings that proponents offer to the collectivity in compensation for the negative externalities of the wind plant. We define an absolute index that allows to order different proposals and evaluate the acceptability of each project, providing the monetary value of each point and inducing a truthful revelation of firms' private information. Moreover, we calibrate the index, on the basis of a representative project and derive the corresponding iso-scoring curves.
    Keywords: Renewable Energy, Wind Power, Scoring Rule, Environmental Externalities
    JEL: Q42 Q58 D4
    Date: 2008

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