nep-agr New Economics Papers
on Agricultural Economics
Issue of 2009‒04‒05
seventeen papers chosen by
Angelo Zago
University of Verona

  1. Land Allocation Effects of the Global Ethanol Surge: Predictions from the International FAPRI Model By Jacinto F. Fabiosa; John C. Beghin; Fengxia Dong; Amani Elobeid; Simla Tokgoz; Tun-Hsiang (Edward) Yu
  2. The Economic Rationale for Agricultural Regeneration and Rural Infrastructure Investment in South Africa By NG Meyer; MC Breitenbach; TI Fényes; A Jooste
  3. Knowledge and innovation for agricultural development: By Asenso-Okyere, Kwadwo; Davis, Kristin
  4. Biofuels: Potential Production Capacity, Effects on Grain and Livestock Sectors, and Implications for Food Prices and Consumers By Dermot J. Hayes; Bruce A. Babcock; Jacinto F. Fabiosa; Simla Tokgoz; Amani Elobeid; Tun-Hsiang (Edward) Yu; Fengxia Dong; Chad E. Hart; Edward Chavez; Suwen Pan; Miguel Carriquiry; Jerome Dumortier
  5. The performance of Bulgarian food markets during reform By Larson, Donald F.; Sarris, Alexander
  6. Agriculture and climate change: An agenda for negotiation in Copenhagen By Nelson, Gerald C.
  7. The Impact of Irrigation on Aquatic Wetland Resources - A Case Study of That Luang Marsh, Lao PDR By Phouphet Kyophilavong
  8. Participation by men and women in off-farm activities: An empirical analysis in rural northern Ghana By McCarthy, Nancy; Sun, Yan
  9. International Water Contracts and Household Outcomes: Evidence from Albania By Justin B. May; Andrew Bacher-Hicks
  10. Crop Yield and Revenue Insurance: Choosing Between Policies That Trigger On Farm vs. County Indexes By Chaffin, Ben
  11. What's Driving Food Prices? March 2009 Update By Abbott, Philip C.; Hurt, Christpher; Tyner, Wallace E.
  12. When Wetland Conservation Works - an Assessment from Lao PDR By Phouphet Kyophilavong
  13. Taxonomy of Causes, Impacts and Policy Responses to the Food Price Crisis in the Andean Region By Jose Cuesta; Fidel Jaramillo
  14. What Drives Biodiversity? An Empirical Assessment of the Relation between Biodiversity and the Economy By Andreas Freytag; Christoph Vietze; Wolfgang Völkl
  15. Energy, the Environment, and Technological Change By David Popp; Richard G. Newell; Adam B. Jaffe
  16. Using Two-Sample Methods to Correct for Reporting Bias in Surveys By Bruce D. Meyer; James X. Sullivan

  1. By: Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); John C. Beghin; Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Simla Tokgoz (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Tun-Hsiang (Edward) Yu
    Abstract: We quantify the emergence of biofuel markets and its impact on U.S. and world agriculture for the coming decade using the multi-market, multi-commodity international FAPRI (Food and Agricultural Policy Research Institute) model. The model incorporates the trade-offs between biofuel, feed, and food production and consumption and international feedback effects of the emergence through world commodity prices and trade. We examine land allocation by type of crop, and pasture use for countries growing feedstock for ethanol (corn, sorghum, wheat, sugarcane, and other grains) and major crops competing with feedstock for land resources such as oilseeds. We shock the model with exogenous changes in ethanol demand, first in the United States, then in Brazil, China, the European Union-25, and India, and compute shock multipliers for land allocation decisions for crops and countries of interest. The multipliers show at the margin how sensitive land allocation is to the growing demand for ethanol. Land moves away from major crops and pasture competing for resources with feedstock crops. Because of the high U.S. tariff on ethanol, higher U.S. demand for ethanol translates into a U.S. ethanol production expansion. The latter has global effects on land allocation as higher coarse grain prices transmit worldwide. Changes in U.S. coarse grain prices also affect U.S. wheat and oilseed prices, which are all transmitted to world markets. In contrast, expansion in Brazil ethanol use and production chiefly affects land used for sugarcane production in Brazil and to a lesser extent in other sugar-producing countries, but with small impacts on other land uses in most countries.
    Keywords: acreage, area, biofuel, corn, crops, ethanol, FAPRI model, feedstock, land, sugar, sugarcane. JEL Code: Q42, Q17, Q18, Q15
    Date: 2009–03
  2. By: NG Meyer (Development Bank of Southern Africa and Department of Economics, University of Pretoria); MC Breitenbach (Department of Economics, University of Pretoria); TI Fényes (Department of Economics, University of Pretoria); A Jooste (Market and Economic Research Centre, National Agricultural Marketing Council (NAMC), Pretoria & Affiliate Professor, Department of Agricultural Economics, University of the Free State, Bloemfontein)
    Abstract: This paper informs government policy insofar as it relates to the agricultural and rural de- velopment sectors and infrastructure investment within these sectors. The paper first quantfies the role of agriculture in the South African economy. This is done within the context of, inter alia, food security, agriculture's contribution to gross domestic product (GDP), economic link- ages and multipliers with respect to the agricultural sector, as well as agriculture's employment creation and external stabilisation capacity. Investment in the agricultural and rural sectors are then analysed with a view of supporting the argument that agriculture's role in the economy is su¢ ciently important to warrant regenerative strategies, including renewed emphasis on agricul- tural and rural infrastructure investment by South African policy makers. The quantification of the agricultural sector in relation to the total economy and that of agricultural and rural infrastructure investment are investigated against the backdrop of declining government sup- port, increasing production risks due to a variety of exogenous events like climate change, and increasing dynamic trade impacts. In this paper, the authors offer both supporting arguments in terms of current economic policy and recommendations for more decisive policy measures aimed at agricultural regeneration and rural infrastructure investment.
    Date: 2009–03
  3. By: Asenso-Okyere, Kwadwo; Davis, Kristin
    Abstract: "Every day, millions of rural people who depend on agriculture confront technical, economic, social, cultural, and traditional obstacles to improving their livelihoods. To cope with these obstacles, the rural poor draw on indigenous knowledge and innovate through local experimentation and adaptation. Indigenous knowledge alone, however, is not enough to deal with the complex problems facing the agricultural sector. Emerging issues such as high food prices, climate change, and demands for biofuels require complementary knowledge from formal agricultural research and development (R&D) and support from policies and other institutions. Formal and informal knowledge and innovation must therefore be linked to accelerate sustainable agricultural development. Knowledge, defined as organized or processed information or data, is fundamental in the pursuit of innovation. For innovation to occur, knowledge must be created, accumulated, shared, and used. Innovations—new ideas, practices, or products that are successfully introduced into economic or social processes— can involve technologies, organizations, institutions, or policies. Innovation means putting ideas, knowledge, and technology to work in a manner that brings about a significant improvement in performance or product quality." from Author's text
    Keywords: Agricultural research, Agricultural development, Innovation, Knowledge, technology, Institutions, Policies, Organizations,
    Date: 2009
  4. By: Dermot J. Hayes (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Bruce A. Babcock (Center for Agricultural and Rural Development (CARD); Midwest Agribusiness Trade Research and Information Center (MATRIC)); Jacinto F. Fabiosa (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Simla Tokgoz (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Tun-Hsiang (Edward) Yu; Fengxia Dong (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Chad E. Hart; Edward Chavez; Suwen Pan; Miguel Carriquiry; Jerome Dumortier
    Abstract: We examine four scenarios for the evolution of the biofuel sector using a partial equilibrium model of the world agricultural sector. The model includes the new Renewable Fuels Standard in the 2007 energy act, the two-way relationship between fossil energy and biofuel markets, and a new trend toward corn oil extraction in ethanol plants. At one extreme, one scenario eliminates all support to the biofuel sector when the energy price is low, while the other extreme assumes no distribution bottleneck in ethanol demand growth when the energy price is high. Of the remaining two scenarios, one considers a pure market force driving ethanol demand growth because of the high energy price while the other is a policy-induced shock with removal of the biofuel tax credit when the energy price is high. We find that the biofuel sector expands with a higher energy price, raising prices of most agricultural commodities through demand-side adjustments for primary feedstocks and supply-side adjustments for substitute crops and livestock. With the removal of all support, including the tax credit, the biofuel sector shrinks, lowering the prices of most agricultural commodities. We also find that, given distribution bottlenecks, cellulosic ethanol crowds marketing channels, resulting in a discounted price of corn-based ethanol. The blenders' credit and consumption mandates provide a price floor for ethanol and for corn. Finally, the tight linkage between the energy and agricultural sectors resulting from the expanding biofuel sector may raise the possibility of spillover effects of OPEC's market power on the agricultural sector.
    Keywords: biofuels, EISA, ethanol, tax credit, world agricultural sector model.
    Date: 2009–03
  5. By: Larson, Donald F.; Sarris, Alexander
    Abstract: Food policy often depends on markets and markets depend on institutions. But how good do institutions have to be before reforms can be launched? Relying on well timed surveys of agricultural prices and a joint study by the Government of Bulgaria and the World Bank on agricultural market institutions, this paper presents evidence that performance in food markets improved following significant policy reforms in Bulgaria, although public institutions remained weak. This suggests that even though strong institutions are preferred to weak ones, it can be costly and impractical to delay policy reforms until work on strengthening institutions is finished. Still, measured performance varied by place and by commodity, suggesting that markets developed at different tempos and that the distribution of benefits from improved markets was uneven. This points to the need to address the costs of adjustment as policies change. The paper introduces a new approach to measure market performance based on composite-error techniques.
    Keywords: Markets and Market Access,Transport Economics Policy&Planning,Economic Theory&Research,Access to Markets,Agribusiness
    Date: 2009–03–01
  6. By: Nelson, Gerald C.
    Keywords: Climate change, Copenhagen,
    Date: 2009
  7. By: Phouphet Kyophilavong (Faculty of Economics and Business Management, National University of Laos)
    Abstract: This study assesses the impact of irrigation on That Luang Marsh (TLM) in Vientiane, the capital city of the People’s Democratic Republic (PDR) of Laos. The study finds that the economic benefits provided by the marsh (particularly in terms of the fish it supplies to local people) far outweigh the benefits provided by the extraction of water for irrigation. As extraction of water for irrigation is threatening the ecology of the marsh and its ability to maintain a viable stock of fish, it is clear that the amount of water extracted for irrigation should be reduced. The report recommends that a minimum level for the water in TLM should be set to ensure the conservation of its precious wetland ecosystem. The report finds that, on balance, this would have a positive impact on the livelihoods of local people. This means that the conservation of the marsh makes good economic sense. To help the farmers who would be negatively affected by these measures, the report shows how they could be trained to use irrigation water more effectively, grow alternative crops that require less water than rice, catch fish and collect vegetables.
    Keywords: wetland, conservation, Lao PDR
    JEL: Q50 Q51 Q56 Q57
    Date: 2009–03
  8. By: McCarthy, Nancy; Sun, Yan
    Abstract: "Using survey data from the Upper East region of Ghana collected in 2005, the paper evaluates the household- and community-level factors influencing women's and men's decisions to participate in off-farm activities, either in the off-farm labor market or in local community groups, and the relationship with on-farm crop returns. Results indicate that crop returns are not affected by increased labor availability over a certain labor-land ratio. Female participation in off-farm labor markets increases at higher levels of labor availability, but participation in women's groups' only increases as labor scarcity is relaxed at lower levels. Alternatively, male participation in off-farm work increases over all levels of labor availability. Results also indicate that male labor is relatively more productive on-farm versus off-farm than female labor, and, though education increases the likelihood that both women and men will work off-farm (with no impact on crop revenues), the impact is greater for women. Finally, participation in off-farm work does not appear to be driven by the need to reduce exposure to risk or to manage risk ex post; wealthier households located in wealthier communities are more likely to participate in off-farm work. Evidence for participation in groups and risk is more complicated; wealthier households in wealthier communities are also more likely to participate, but so too are female-headed households with higher dependency ratios." from authors' abstract
    Keywords: Off-farm labor supply, Participation, Community groups, Gender, Land management, Poverty reduction,
    Date: 2009
  9. By: Justin B. May (Department of Economics, College of William and Mary); Andrew Bacher-Hicks
    Abstract: In mid-2003, four of 36 Albanian political districts entered into management contracts with Berlinwasser International AG for the provision of water supply. Using 2002 and 2005 data from the World Bank's Living Standards Measurement Study for Albania, we assess the results of this contracting out of supply on various household outcomes including continuity of water supply, hours per day of water availability, water price, water source, water quality, and incidence of diarrhea. Using a difference-in-difference approach and controlling for a variety of household characteristics, our results suggest that consumers in contracted districts experience no significant change in hours per day of service though privatization comes with average price increases of 13-17 percent. In a multinomial logit framework, we find that consumers in contracted districts are significantly less likely to use water from an outdoor tap, a public tap, or a spring/well but far more likely to report obtaining water by truck. Households receiving piped water in contracted districts are 29 percentage points more likely to report their subjective water quality as "unsuitable for drinking", though estimates suggest no significant change in the incidence of diarrhea in contracted districts.
    Keywords: Albania, household, management contract, privatization, water supply
    JEL: H51 L33 O12 O13
    Date: 2009–03–30
  10. By: Chaffin, Ben
    Abstract: Insurance policies that trigger on county yield and revenue indexes are expected to be more actuarially fair than policies that trigger on individual farm yield and revenue since individual farm hidden actions and hidden information impacting purchase decisions will be built into insurance premium rates. Findings are expected to help farmers, insurance agents, lenders, and those in academia better understand and evaluate insurance policies that trigger indemnity payments based on county indexes. Case studies are provided to facilitate understanding of tracking between farm and county yields and the importance of the farm-county yield correlation. A protocol is developed to standardize county and farm yields to better illustrate tracking and rules-of- thumb are developed to aid in crop insurance purchase decisions. Cumulative probability distributions of net yields with and without insurance are used to show the effects of county and farm trigger insurance policies on risk transfer. The farm location and spatial diversification in a county result in variations in the farm-county yield correlations and yield basis risk. These measures are directly related to the risk transfer performance of county trigger policies relative to no insurance and to farm trigger insurance policies.
    Keywords: Farm Management, Risk and Uncertainty,
    Date: 2009
  11. By: Abbott, Philip C.; Hurt, Christpher; Tyner, Wallace E.
    Abstract: In the spring and early summer of 2008, the temperature of the rhetoric in the foodversus- fuel debate was skyrocketing right along with the prices of corn, soybeans and crude oil. Farm Foundation is not about heat or fueling fires. Our mission is to be a catalyst for sound public policy by providing objective information to foster deeper understanding of the complex issues before the food system today. We commissioned Purdue University economists Wallace Tyner, Philip Abbott and Christopher Hurt to provide a comprehensive, objective assessment of the forces driving food prices. Released in July 2008, What’s Driving Food Prices? identified three major drivers of prices—depreciation of the U.S. dollar, changes in production and consumption, and growth in biofuels production. The three economists also reviewed more than two dozen reports and studies in the academic and popular press about commodity prices, biofuels and food prices, summarizing them in light of their own examination of the facts. Today, just eight months later, the landscape is remarkably different. The 2008/2009 crop production was higher than forecast, quieting talk of inadequate supplies. Significant declines have occurred in crude oil, grain and oilseed crop prices. Biofuel production has slowed. The value of the U.S. dollar has appreciated. A global financial crisis and recession now dominate the news. Given this remarkable reversal of conditions, we asked Tyner, Abbott and Hurt to reexamine the drivers of food prices. Their analysis indicates that now, as eight months ago, the answers are not simple. While the level of food prices has dropped, the forces driving those prices remain the same today as in July 2008, as does the need to understand how those forces work and interact. As did the July 2008 report, this update reinforces the fact that food prices are influenced by diverse and multiple factors generated by complex global economic issues. It is the intent of Farm Foundation that the objective information provided in this report will help public and private leaders better understand the functions of these driving forces as they make business and public policy decisions for the future.
    Keywords: Food Consumption/Nutrition/Food Safety,
    Date: 2009–03
  12. By: Phouphet Kyophilavong (Faculty of Economics and Business Management, National University of Laos)
    Abstract: Wetlands are among the most important habitats for wildlife in the world. However, across Southeast Asia many wetland areas are under threat from water extraction and a range of other development pressures. This study finds that conserving wetlands can provide significant economic benefits.
    Keywords: wetland, conservation, Lao PDR
    JEL: Q50 Q51 Q56 Q57
    Date: 2009–03
  13. By: Jose Cuesta; Fidel Jaramillo
    Abstract: This paper analyzes the causes, effects and policy alternatives associated with the recent international food price crisis in the Andean region. Additionally, the document makes a first approach to the policy options utilized to confront the crisis, discussing the mix of policies and their potential effectiveness, using a qualitative methodology based in part on schemes proposed in Manzano and Stein (2008), and Malarín (2008). A final section underscores various messages common to the countries of the region. Specifically, the report concludes that this crisis offers a great opportunity for transforming its uncertainties and costs into a stimulus for maturing an infrastructure of prevention and reduction of vulnerabilities in the Andean economies.
    Keywords: Food crisis, Distributive impact, Simulation, Compensatory policies, Andean region
    JEL: O20 O18 I30
    Date: 2009–04
  14. By: Andreas Freytag (Friedrich-Schiller-University Jena, Chair for Economic Policy); Christoph Vietze (Friedrich-Schiller-University Jena, Chair for Economic Policy); Wolfgang Völkl
    Abstract: The environmental discussion is increasingly extended to the question of how to preserve biodiversity. As sensible regulation of biodiversity utilization uses politically set incentive schemes, it is required to discus the monetary value of biodiversity. Consequently, the relation between economic incentives and biodiversity is in the focus of our paper. By using bird species as bio indicators we derive first empirical results. In sum, one still may conclude that indeed economic growth is harmful for biodiversity. This is at least in line with the first part of biodiversity Kuznets curve. However, the existence of good institutions (especially a high quality of regulation) can in part prevent this effect, which can be cautiously interpreted as a hint that economic growth is not necessarily related to losses of biodiversity. With good governmental institutions, these losses may be prevented or mitigated.
    Keywords: economic growth, institutions, development, biodiversity, cross country analysis
    JEL: O13 Q27
    Date: 2009–03–27
  15. By: David Popp; Richard G. Newell; Adam B. Jaffe
    Abstract: Within the field of environmental economics, the role of technological change has received much attention. The long-term nature of many environmental problems, such as climate change, makes understanding the evolution of technology an important part of projecting future impacts. Moreover, in many cases environmental problems cannot be addressed, or can only be addressed at great cost, using existing technologies. Providing incentives to develop new environmentally-friendly technologies then becomes a focus of environmental policy. This chapter reviews the literature on technological change and the environment. Our goals are to introduce technological change economists to how the lessons of the economics of technological change have been applied in the field of environmental economics, and suggest ways in which scholars of technological change could contribute to the field of environmental economics.
    JEL: O30 Q53 Q54 Q55
    Date: 2009–04
  16. By: Bruce D. Meyer; James X. Sullivan
    Abstract: Benefit receipt in major household surveys is often underreported. This understatement has major implications for our understanding of the economic circumstances of disadvantaged populations, program takeup, the distributional effects of government programs, and studies of other program effects. We provide a new econometric method for estimating the determinants of reporting that uses two data sources with overlapping demographic characteristics rather than requiring matched individual data. This method compares the characteristics of those who report receipt in the survey to the characteristics of recipients in the administrative data to determine the influence of those characteristics on reporting. Our estimates using this two sample estimation procedure indicate that observable characteristics are related to underreporting in the case of the Food Stamp Program (FSP). We then show how these results can be used to correct for underreporting bias in studies of FSP participation or the distributional effects of the FSP. Our results also have implications for studies that use FSP receipt as an explanatory variable.
    Keywords: food stamp program, benefits, reporting
    Date: 2009–02
  17. By: Stathis Klonaris (Department of Agricultural Economics & Rural Development, Agricultural University of Athens"); Garyfallos Arabatzis (Department of Forestry and Management of the Environment and Natural Resources, Democritus University of Thrace)
    Abstract: In Greece and internationally, the roundwood is one of the most important forest products as it is used widely in construction and building sector. In this study the process of wholesale long-length roundwood (>2m) price determination is depicted in the form of an inverse demand system. The empirical application based on five species of long-length roundwood using yearly data for auctions providing reasonable and promising results. The own-quantity flexibilities suggest that the responses of prices to own-quantity changes are inelastic while Allais coefficients suggest substitutability between the different species of log-length roundwood.
    Keywords: Inverse Almost Ideal Demand System, demand analysis, flexibilities, long-length roundwood, wood sector, Greece
    JEL: Q11 F10 C32
    Date: 2009

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