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on Agricultural Economics |
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Issue of 2010‒08‒21
eighteen papers chosen by |
| By: | Martinez, Steve; Hand, Michael; Da Pra, Michelle; Pollack, Susan; Ralston, Katherine; Smith, Travis; Vogel, Stephen; Clarke, Shellye; Lohr, Luanne; Low, Sarah; Newman, Constance |
| Abstract: | Consumer demand for food that is locally produced,marketed, and consumed is generating increased interest in local food throughout the United States. As interest grows, so do questions about what constitutes local food and what characterizes local food systems. What Is the Issue? This study provides a comprehensive literature-review-based overview of the current understanding of local food systems, including: alternative defi nitions; estimates of market size and reach; descriptions of the characteristics of local food consumers and producers; and an examination of early evidence on the economic and health impacts of such systems. What Did the Study Find? There is no generally accepted definition of “local” food. Though “local” has a geographic connotation, there is no consensus on a definition in terms of the distance between production and consumption. Definitions related to geographic distance between production and sales vary by regions, companies, consumers, and local food markets. According to the definition adopted by the U.S. Congress in the 2008 Food, Conservation, and Energy Act,the total distance that a product can be transported and still be considered a “locally or regionally produced agricultural food product” is less than 400 miles from its origin, or within the State in which it is produced. Definitions based on market arrangements, including direct-to-consumer arrangements such as regional farmers’ markets, or direct-to-retail/foodservice arrangements such as farm sales to schools, are well-recognized categories and are used in this report to provide statistics on the market development of local foods. Local food markets account for a small but growing share of total U.S. agricultural sales. • Direct-to-consumer marketing amounted to $1.2 billion in current dollar sales in 2007, according to the 2007 Census of Agriculture, compared with $551 million in 1997. • Direct-to-consumer sales accounted for 0.4 percent of total agricultural sales in 2007, up from 0.3 percent in 1997. If nonedible products are excluded from total agricultural sales, direct-to consumer sales accounted for 0.8 percent of agricultural sales in 2007. • The number of farmers’ markets rose to 5,274 in 2009, up from 2,756 in 1998 and 1,755 in 1994, according to USDA’s Agricultural Marketing Service. • In 2005, there were 1,144 community-supported agriculture organizations, up from 400 in 2001 and 2 in 1986, according to a study by the National Center for Appropriate Technology. In early 2010, estimates exceeded 1,400, but the number could be much larger. • The number of farm to school programs, which use local farms as food suppliers for school meals programs and promote relationships between schools and farms, increased to 2,095 in 2009, up from 400 in 2004 and 2 in the 1996-97 school year, according to the National Farm to School Network. Data from the 2005 School Nutrition and Dietary Assessment Survey, sponsored by USDA’s Food and Nutrition Service, showed that 14 percent of school districts participated in Farm to School programs, and 16 percent reported having guidelines for purchasing locally grown produce. Production of locally marketed food is more likely to occur on small farms located in or near metropolitan counties. Local food markets typically involve small farmers, heterogeneous products, and short supply chains in which farmers also perform marketing functions, including storage, packaging, transportation, distribution, and advertising. According to the 2007 U.S. Census of Agriculture, most farms that sell directly to consumers are small farms with less than $50,000 in total farm sales, located in urban corridors of the Northeast and the West Coast. In 2007, direct-to-consumer sales accounted for a larger share of sales for small farms, as defi ned above, than for medium-sized farms (total farm sales of $50,000 to $499,999) and large farms (total farm sales of $500,000 or more). Produce farms engaged in local marketing made 56 percent of total agricultural direct sales to consumers, while accounting for 26 percent of all farms engaged in direct-to-consumer marketing. Direct-to-consumer sales are higher for the farms engaged in other entrepreneurial activities, such as organic production, tourism, and customwork (planting, plowing, harvesting, etc. for others), than for other farms. In 2007, direct sales by all U.S. farms surpassed customwork to become the leading on-farm entrepreneurial activity in terms of farm household participation. Barriers to local food-market entry and expansion include: capacity constraints for small farms and lack of distribution systems for moving local food into mainstream markets; limited research, education, and training for marketing local food; and uncertainties related to regulations that may affect local food production, such as food safety requirements. Consumers who value high-quality foods produced with low environmental impact are willing to pay more for locally produced food. Several studies have explored consumer preferences for locally produced food. Motives for “buying local” include perceived quality and freshness of local food and support for the local economy. Consumers who are willing to pay higher prices for locally produced foods place importance on product quality, nutritional value, methods of raising a product and those methods’ effects on the environment, and support for local farmers. Federal, State, and local government programs increasingly support local food systems. Many existing government programs and policies support local food initiatives, and the number of such programs is growing. Federal policies have grown over time to include the Community Food Project Grants Program, the WIC Farmers’ Market Nutrition Program, Senior Farmers’ Market Nutrition Program, Federal State Marketing Improvement Program, National Farmers’ Market Promotion Program, Specialty Crop Block Grant Program, and the Community Facilities Program. State and local policies include those related to farm-to-institution procurement, promotion of local food markets, incentives for low-income consumers to shop at farmers’ markets, and creation of State Food Policy Councils to discuss opportunities and potential impact of government intervention. (WIC is the acronym for the Special Supplemental Nutrition Program for Women, Infants, and Children). As of early 2010, there were few studies on the impact of local food markets on economic development, health, or environmental quality. • Empirical research has found that expanding local food systems in a community can increase employment and income in that community. • Empirical evidence is insuffi cient to determine whether local food availability improves diet quality or food security. • Life-cycle assessments—analyses of energy use at all stages of the food system including consumption and disposal—suggest that localization can but does not necessarily reduce energy use or greenhouse gas emissions. How Was the Study Conducted? Existing analyses of local food markets by universities, government agencies, national nonprofit organizations, and others of local food markets were synthesized to evaluate the definition of local foods and the effects of local food systems on economic development, health and nutrition, food security, and energy use and greenhouse gas emissions. The report’s content relies on data collected through the 2007 Census of Agriculture, as well as other surveys by USDA’s Agricultural Marketing Service, the National Farm to School Network, university extension departments, and others, to provide a comprehensive picture of types of local food markets, their characteristics, and their importance over time. |
| Keywords: | Local food systems; farmers’ markets; direct-to-consumer marketing; direct-to-retail/foodservice marketing; community supported agriculture; farm to school programs; Farmers’ Market Promotion Program; food miles; ERS; USDA |
| JEL: | L1 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24313&r=agr |
| By: | James, Harvey S. Jr.; Hendrickson, Mary K. |
| Abstract: | In this paper we consider the question of whether middle-scale farmers, which we define as producers generating between $100,000 and$250,000 in sales annually, are better agricultural stewards than small and large-scale producers. Our study is motivated by the argument of some commentators that farmers of this class ought to be protected in part because of the unique attitudes and values they possess regarding what constitutes a âgood farmerâ. We present results of a survey of Missouri farmers designed to assess farmer attitudes and values regarding a variety of indicators of farmer stewardship, such as the most important issues in agriculture, environment and treatment of farm animals, perspectives on the past and future of agriculture, and ethical behavior. We find no evidence that farmers-of-the-middle are particularly noteworthy in these regards. We do find evidence, however, that middle-scale farmers are more pessimistic and anxious about their role in the future of agriculture. |
| Keywords: | Farmers of the middle, good farmer, agrarianism, farmer attitudes and values, Environmental Economics and Policy, |
| Date: | 2009–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umcowp:92623&r=agr |
| By: | Hichaambwa, Munguzwe; Tschirley, David L. |
| Abstract: | Daily quantities of tomato, rape and onion entering Soweto market in Lusaka fluctuate dramatically. The market does a remarkable job of moderating the impact on prices of these unstable quantities, through stabilizing mechanisms such as short-term storage of tomato and rape by traders and consumers, longer-term storage of onion by traders, direct sourcing of rape from farm areas by retail traders, and exportation of tomato and onion outside Lusaka. Yet even with these stabilizing mechanisms, wholesale prices are highly variable, with negative effects on farmers and consumers. Reducing variability requires investments in four areas: (a) improved control of production environments by farmers through irrigation, better access to inputs and greater agronomic knowledge, (b) improved vertical flow of information from farmers to traders to brokers to retailers, (c) a regulatory framework for broker activity to improve trust and information flow between brokers and sellers, and (d) improved market infrastructure. |
| Keywords: | Produce, Zambia, Africa, Agricultural and Food Policy, Food Security and Poverty, Marketing, |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:ags:midcpb:93009&r=agr |
| By: | Sommer, Rolf; Djanibekov, Nodir; Salaev, Omonbek |
| Abstract: | Land use and crop production in the Khorezm region in western Uzbekistan, exemplarily for the irrigated low-lands of Central Asia, is adversely affected by the excessive, non-sustainable use of irrigation water on one hand, repeated droughts on the other hand, and by soil degradation by secondary salinization. One of the research objectives of the German-Uzbek Khorezm project, funded by the German Ministry for Education and Research (BMBF) and led by ZEF, is to better understand options for land use and choice of technology at the farm level in order to evaluate and propose technological alternatives and policy options for sustainable land use in Khorezm. To address the latter, the integrated so-called Farm-Level Economic-Ecological Optimization Model (FLEOM) was developed. FLEOM optimizes farm-level land and resource use while at the same time assessing the respective economic and environmental impacts. The model captures the basic features of the regional agriculture and the interrelations of production activities most prevalent to the local farmers. FLEOM builds on an economic farm-household linear-programming (LP) optimization routine and a comprehensive agronomic data base established with the cropping system simulation model, CropSyst. A graphical user-interface programmed in Java provides for easy usability, by which settings and results of FLEOM are visualized in tables and figures or as maps via a GIS-environment. The present discussion paper provides a technical introduction to FLEOM and discusses first application results. |
| Keywords: | Sustainability of agro-ecosystems, Integrated biophysical-economic modeling, Cropping system, Land use planning, Policy assessment, Agribusiness, Agricultural and Food Policy, Q12, O13, O21, Q18, |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ubzefd:92546&r=agr |
| By: | Tschirley, David L.; Flores, Luis; Mather, David |
| Abstract: | Performance of the agricultural sector in developing countries is fundamental to ensuring robust and equitable economic growth and broad-based food security. Yet donor support to agricultural development in developing countries has declined continuously for 30 years. This same period saw dramatic deterioration in developing countriesâ institutional capacity to provide services to their agricultural sectors. These trends may now be changing, due in part to the global food price crisis of 2007 and 2008 and concerns that it unleashed about the worldâs ability to feed its poorest inhabitants. This paper reports on the results of a two week trip to Guatemala and Nicaragua made by Michigan State Universityâs Food Security Group. The purpose of the trip was to assess two aspects that form the foundation for applied agricultural and food security policy analysis and outreach: (a) the organizations involved in research and outreach on these topics, and (b) existing data sets and processes for continued generation of data sets useful in such analysis and outreach. The team also explored the extent to which policy makers and designers of public programs solicit empirical data and analysis for the design and implementation of local food security programs and policies. |
| Keywords: | agricultural sector, central america, food security, Agricultural and Food Policy, Food Security and Poverty, International Development, Marketing, |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:midiwp:93029&r=agr |
| By: | Pavel Ciaian; d'Artis Kancs; Sergio Gomez y Paloma |
| Abstract: | In this paper we estimate the income distributional effects of the common agricultural policy (CAP) for farmers and landowners. First, we theoretically analyse the level of farmers' and landowners' gains from coupled and decoupled payments. Second, using a unique farm level panel data set from the FADN for the period 1995-2007 we employ the fixed effects, the Heckman selection bias and the GMM estimators to estimate income distributional effects of CAP subsidies. The results do not confirm the theoretical hypothesis that landowners benefit a large share of the CAP subsidies. According to our estimates, farmers gain between 60% to 95%, 80% to 178% and 86% to 90% of the total value of coupled crop/animal, coupled RDP and decupled payments, respectively. The CAP subsidies are only marginally capitalised in land rents. Our results suggest that the rental rates are more responsive to structural variables and show a strong time dependency, suggesting the presence of rigidities in the EU rental markets, which constraint the adjustment of land rents to market signals and thus reduce landowners' gains from the CAP. |
| Keywords: | Distributional effects, panel microdata, GMM, CAP, land rents. |
| JEL: | F12 L11 Q11 Q12 Q15 Q18 P32 R12 R23 |
| Date: | 2010–05–05 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2010_05&r=agr |
| By: | Boniface, Bonaventure; Gyau, Amos; Stringer, Randy |
| Abstract: | Dairy market in Malaysia has been increasing due to high income and population growth in the region. In response to the increasing demand, milk processors need to obtain constant milk supplies from the dairy farmers. One way of doing this is when the buyers and the sellers build and maintain quality relationships in order to enhance long term sustainability of the milk supply. This paper examines the determinants of relationship quality and its role in enhancing long term relationship between the Malaysian milk processors and dairy farmers. The study revealed that where as mutuality and price satisfaction influence the perceived relationship quality of the farmers positively; dependency and price flexibility do not. Furthermore, the perceived relationship quality of the farmers has a positive influence on long term orientation of the relationship. |
| Keywords: | Long term relationships; Relationship Quality; Dairy Industry; Malaysia |
| JEL: | L14 |
| Date: | 2009–12–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24420&r=agr |
| By: | Avner Offer (All Souls College, University of Oxford, OX1 4AL, UK); Rachel Pechey (Institute of Social and Cultural Anthropology, University of Oxford, OX2 6PE, UK); Stanley Ulijaszek (Institute of Social and Cultural Anthropology, University of Oxford, OX2 6PE, UK) |
| Abstract: | Among affluent countries, those with market-liberal welfare regimes (which are also English-speaking) tend to have the highest prevalence of obesity. The impact of cheap, accessible high-energy food is often invoked in explanation. An alternative approach is that overeating is a response to stress, and that competition, uncertainty and inequality make market-liberal societies more stressful. This ecological regression meta-study pools 96 body-weight surveys from 11 countries c. 1994-2004. The fast-food ‘shock’ impact is found to work most strongly in market liberal countries. Economic insecurity, measured in several different ways, was almost twice as powerful, while the impact of inequality was weak, and went in the opposite direction. |
| Date: | 2010–07–15 |
| URL: | http://d.repec.org/n?u=RePEc:nuf:esohwp:_082&r=agr |
| By: | Taylor, Richard D.; Koo, Won W. |
| Abstract: | The objective of this study is to evaluate the changes in U.S. sugar production and Greenhouse Gas (GHG) emissions from the sugar industry if the United States regulates GHG emissions from domestic sugar processing facilities. A spatial equilibrium model is developed to optimize sugar production in the United States under a base scenario and three different levels of CO2e taxes or prices of carbon offsets. This research focuses on U.S. sugar production, both beet and cane sugar. In the model the United States is divided into 6 beet growing regions and 4 cane growing regions. The model also includes Mexico as a domestic sugar growing region as Mexico has the ability to export unlimited amount of sugar into the United States under NAFTA. A rest of the world region is included because the United States imports sugar from about 40 different nations. The results indicate that sugar production by the U.S. beet sugar industry will decrease substantially if carbon emissions are taxed in the United States. Production in the U.S. cane industry will also decrease, but only slightly. Sugar imports from Mexico will increase but the majority of the imported sugar will come from other countries as Mexicoâs ability to increase sugar production is limited. GHG emissions will decrease, but only slightly, because the GHG emissions that are reduced in the United States are replaced by GHG emission in other nations as U.S. sugar production is shipped overseas. However the impacts on the U.S. sugar industry would be substantial with GHG emission regulations. |
| Keywords: | GHG emissions, CO2e, Sugar, spatial equilibrium model, carbon tax, cap and trade, Agribusiness, Environmental Economics and Policy, |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nddaae:93027&r=agr |
| By: | Taylor, Richard D.; Koo, Won W. |
| Abstract: | The objective of this study is to evaluate the changes in U.S. sugar production and Greenhouse Gas (GHG) emissions from the sugar industry if the United States regulates GHG emissions from domestic sugar processing facilities. A spatial equilibrium model is developed to optimize sugar production in the United States under a base scenario and three different levels of CO2e taxes or prices of carbon offsets. This research focuses on U.S. sugar production, both beet and cane sugar. In the model the United States is divided into 6 beet growing regions and 4 cane growing regions. The model also includes Mexico as a domestic sugar growing region as Mexico has the ability to export unlimited amount of sugar into the United States under NAFTA. A rest of the world region is included because the United States imports sugar from about 40 different nations. The results indicate that sugar production by the U.S. beet sugar industry will decrease substantially if carbon emissions are taxed in the United States. Production in the U.S. cane industry will also decrease, but only slightly. Sugar imports from Mexico will increase but the majority of the imported sugar will come from other countries as Mexicoâs ability to increase sugar production is limited. GHG emissions will decrease, but only slightly, because the GHG emissions that are reduced in the United States are replaced by GHG emission in other nations as U.S. sugar production is shipped overseas. However the impacts on the U.S. sugar industry would be substantial with GHG emission regulations. |
| Keywords: | GHG emissions, CO2e, Sugar, spatial equilibrium model, carbon tax, cap and trade, Agribusiness, Environmental Economics and Policy, |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:nddaae:93025&r=agr |
| By: | Parthapratim Pal; Deepika Wadhwa |
| Abstract: | This paper takes a detailed look at the SSM and analyzes its usefulness for developing countries. It also explores how the concept of a special agricultural safeguard has evolved in the present round of negotiations and what are the country positions on SSMs in the Doha Round. The paper then proposes a price-trigger-based SSM instrument which is consistent with the goals spelt out in the Doha Development Agenda and satisfies most of the desired features of a safeguard instrument. [Working Paper No. 189] |
| Keywords: | WTO, Agriculture, Volatility, Special safeguards, Tariff rates |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2758&r=agr |
| By: | . Abhishek; Abraham Koshy |
| Abstract: | The paper examines how retailers can influence the quality perceptions for private label brands by providing additional information cues to the customers. The nature of additional information cues may have differential impact on quality perceptions of private label brands vis-à -vis national brands. The paper proposes extrinsic high scope cues – in form of manufacturer’s name and public quality label – to improve the quality perceptions of private label brands. Furthermore, the familiarity of the product may influence the quality perceptions, consequently influencing the purchase decision. The paper also proposes differential impact of information cues across different product categories on quality perceptions of private label brands. [W.P. No.2008-02-04] |
| Keywords: | quality, perceptions, label, brands, extrinsic, high scopes, manufacture, public quality |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2756&r=agr |
| By: | Tisdell, Clem A. |
| Abstract: | Analyses the economics of alternative land-use allocations for a forested area that ensure a targeted viable population of a forest-dependent species, such as the orangutan. The alternative of setting aside a sufficient fully protected portion of the forested area allowing the rest to be used for intensive forestry (or another intensive land use) in which the focal species is unable to survive is compared with that of fully protecting none of the forested area but allowing a sufficient portion of it to be lightly logged to ensure the survival of the targeted population of the focal species with the remainder of the land area (if any) being available for intensive use. The conditions for determining the least cost option (the one that minimizes profit forgone) are identified. It is not possible to say a priori which land use is the least cost option. The matter should not be prejudged as some conservationists tend to do. |
| Keywords: | biodiversity conservation, conservation of forest-dependent species, forestry, heavy versus light logging, intensive versus extensive land use and conservation, logging and conservation, opportunity cost and species conservation, orangutan conservation., Environmental Economics and Policy, Q23, Q51, Q57, |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uqseee:92773&r=agr |
| By: | Andersen, Matt A.; Alston, Julian M.; Pardey, Philip G. |
| Abstract: | This is a substantially revised version of âCapital Service Flows: Concepts and Comparisons of Alternative Measures in U.S. Agriculture.â Andersen, Matt A.; Alston, Julian M.; Pardey, Philip G., St. Paul, MN: University of Minnesota, Department of Applied Economics; University of Minnesota, International Science and Technology Practice and Policy (InSTePP), 2009. (Staff paper P09-8; InSTePP paper 09-03) |
| Keywords: | Agricultural Finance, |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umaesp:92801&r=agr |
| By: | Etienne BILLETTE de VILLEMEUR; Justin Leroux (IEA, HEC Montréal) |
| Abstract: | Due to meteorological factors, the distribution of the environmental damage due to climate change bears no relationship to that of global emissions. We argue in favor of offsetting this discrepancy, and propose a “global insurance scheme” to be financed according to countries’ responsibility for climate change. Because GHG decay very slowly, we argue that the actual burden of global warming should be shared on the basis of cumulated emissions, rather than sharing the expected costs of actual emissions as in a Pigovian taxation scheme. We characterize new versions of two well-known cost-sharing schemes by adapting the responsibility theory of Bossert and Fleurbaey (1996) to a context with externalities. |
| Keywords: | Climate Change, Cost Sharing, Responsibility, Compensation. |
| JEL: | D62 D63 Q54 |
| Date: | 2010–08 |
| URL: | http://d.repec.org/n?u=RePEc:iea:carech:1004&r=agr |
| By: | Tisdell, Clem A. |
| Abstract: | Critically reviews the following core issues in the economics of biodiversity conservation: reliance on the stated preferences of individuals as a guide to biodiversity conservation, the relevance of the phylogenetic similarity principle (and other attributes of organisms) for the survival of species; the implications of the Noahâs ark problem for selecting features of biodiversity to be saved and the difficulties raised by criteria based on safe minimum populations of species or on minimum environmental standards; the extent to which the precautionary principle can be rationally used to support the conservation of biodiversity; the impact of market extensions and globalization, as well as market and other institutional failures, on biodiversity loss; the relationship between the rate of interest and biodiversity loss; and the implications of intergenerational equity for biodiversity conservation. The consequences of changes in biodiversity for sustainable development are given particular attention. |
| Keywords: | biodiversity conservation, economic valuation, intergenerational equity, phylogenetic similarity principle, precautionary principle, sustainable development., Environmental Economics and Policy, Q5, Q51, Q56, Q57, |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uqseee:92772&r=agr |
| By: | Franck Lecocq (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Sylvain Caurla (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Philippe Delacote (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Ahmed Barkaoui (Laboratoire d'Economie Forestière, INRA - AgroParisTech); Alexandre Sauquet (Laboratoire d'Economie Forestière, INRA - AgroParisTech) |
| Abstract: | Forests can contribute to climate mitigation by sequestrating carbon in forest biomass andby replacing fossil-fuel with fuelwood, with potentially conflicting implications for forest management.The present paper assesses the mitigation and the economic impacts of a "stock" policy(payment for sequestration in situ), a "substitution" policy (subsidy to fuelwood consumption),and a combination thereof on the French forest sector. The policies are consistent in that theyare based on the same social cost of carbon. To do so, we use the French Forest Sector Model(FFSM), which combines a dynamic model of French timber resource, and a dynamic partial equilibriummodel of the French forest sector. Simulations show that over the 2010-2020 period,the stock policy is the only one that performs better than Business As Usual (BAU) in terms ofcarbon. Over this period of time, the cumulative substitution benefits of the substitution policyare not sufficient to offset the loss of carbon in standing forests. However, the stock policy hasalso negative impacts on consumers welfare, and increasingly high costs as carbon in excess ofBAU is accumulated in forests. Combining both policies brings intermediate results and is thusless effective than focusing on a single policy. |
| Keywords: | carbon storage, biomass energy, forest sector modeling |
| JEL: | L52 Q23 Q42 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:lef:wpaper:2010-02&r=agr |
| By: | Färnstrand Damsgaard, Erika (Research Institute of Industrial Economics (IFN)) |
| Abstract: | How should the world economy adapt to the increased demand for exhaustible resources from countries like China and India? To address that issue, this paper presents a dynamic model of the world economy with two technologies for production; a resource technology which uses an exhaustible resource as an input and an alternative technology, which does not. I find that both the time path of resource extraction and the adoption of the alternative technology depend on the optimal allocation of capital across the technologies, and the size of the capital stock in relation to the resource stock. In particular, if the capital stock is small, only the resource technology is used initally, and the alternative technology is adopted with a delay. Next, the model is calibrated to analyze the e¤ects of industrialization of developing countries on the extraction of oil and technology choice for energy production. As a result of industrialization, resource extraction increases and the alternative technology is adopted earlier. |
| Keywords: | Exhaustible resources; Technological change |
| JEL: | Q30 Q40 |
| Date: | 2010–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:iuiwop:0844&r=agr |