nep-agr New Economics Papers
on Agricultural Economics
Issue of 2011‒04‒09
ten papers chosen by
Angelo Zago
University of Verona

  1. Modelling the Impact of Policies to Reduce Environmental Impacts in the New Zealand Dairy Sector By Anna Strutt; Allan N. Rae
  2. Food Security vs. Food Self-Sufficiency: The Indonesian Case By Peter Warr
  3. A Ricardian analysis of the climate change impact on Nepalese agriculture By Thapa, Sridhar; Joshi, Ganesh Raj
  4. Climate change, uncertainty and adaptation: the case of irrigated agriculture in the Murray–Darling Basin in Australia By John Quiggin; David Adamson; Sarah Chambers; Peggy Schrobback
  5. Too little too late : welfare impacts of rainfall shocks in rural Indonesia By Skoufias, Emmanuel; Essama-Nssah, B.; Katayama, Roy S.
  6. Real Options Valuation of Abandoned Farmland By Michi Nishihara
  7. Extreme Measures of Agricultural Financial Risk By John Cotter; Kevin Dowd; Wyn Morgan
  8. Risk, uncertainty and the Guide to the Draft Basin Plan By John Quiggin
  9. The Regional Economic Development Potential and Constraints to Local Foods Development in the Midwest By Swenson, David A.
  10. The Fair Trade movement:an economic perspective By Alexander Kadow

  1. By: Anna Strutt (University of Waikato); Allan N. Rae (Massey University)
    Abstract: Agriculture remains a major sector of the New Zealand economy, with the vast majority of farm and food production exported. The accelerating intensification of farming in New Zealand over recent decades raises concern over the current sustainability of New Zealand farming, and whether it can remain so in the future. In this study, we focus on the impacts of policies to reduce environmental impacts of dairy farming, with a particular focus on nitrogen pollution and greenhouse gases (GHG) emissions. We use a modified version of the Global Trade Analysis Project (GTAP) model and database, with improved specification of the agricultural sector and land-use. We augment the model with environmental indicators for New Zealand, including nitrogen balances and GHG emissions.
    Keywords: global CGE model; dairy production; environmental impacts; environmental policy
    JEL: F14 F17 F18 O13 Q15 Q17 Q53 Q58
    Date: 2011–03–28
  2. By: Peter Warr
    Abstract: Food security is an important social objective and relying on international food markets to meet the needs of Indonesia's growing population is precarious. The policy of restricting food imports through tariffs or quantitative restrictions promotes the goal of food self-sufficiency, but does so at the cost of reducing the food security of the most vulnerable people – the poorest net consumers of rice. These policies reduce imports through the mechanism of raising the domestic price. The poorest consumers bear the greatest burden from this policy because they are the people for whom expenditures on food form the largest proportion of their household budgets. A preferable strategy for raising self-sufficiency is to promote improved agricultural productivity. This reduces imports by raising agricultural output but does so without raising the domestic price of food and so without creating a conflict between the goals of higher levels of self-sufficiency on the one hand and food security and poverty reduction on the other. Unfortunately, Indonesia's commitment to raising agricultural productivity has seemingly waned. Finally, Indonesia has already demonstrated that practical mechanisms can be designed for shielding poor consumers from price increases that would otherwise be harmful, by designing systems of Conditional Cash Transfers.
    Keywords: Food security, poverty incidence, rice policy
    JEL: Q18 O13 F13
    Date: 2011
  3. By: Thapa, Sridhar; Joshi, Ganesh Raj
    Abstract: This paper applies Ricardian approach to measure the effect of climate change on crop production in Nepal using cross-section data of Nepal Living Standard Survey 2003/04 and climate data from Department of Hydrology and Meteorology, Nepal. The study examines the relationship between net farm revenue and climate variables using 656 households of 14 districts covering all climatic zones of Nepal. Net farm revenue is regressed on climate and socio-economic variables. The findings show that these variables have significant impact on the net farm value per hectare. More specifically, relatively low precipitation and high temperature seem to have positive impact on net farm income during the fall and spring seasons. Net farm income is likely to be increased by summer precipitation, but not by temperature. Marginal impacts are mostly in line with the Ricardian model, showing marginally increasing precipitation during summer and winter would increase net farm income, but reduce by the quarter terms and temperature of these seasons. Moreover, marginally increasing precipitation would increase farm income in the hilly region, but reduce in Terai region. Other variables such as ratio of irrigated farm land and obtaining credit are found to be positive impact on net farm value but not by farm size. Conclusively, the impact of climate change on agriculture seems to be varied with the temperature and precipitation in different climatic zones.
    Keywords: climate change; agriculture; Ricardian approach; marginal impact; Nepal
    JEL: Q24 C31 Q54
    Date: 2010–12
  4. By: John Quiggin (Risk & Sustainable Management Group, School of Economics, University of Queensland); David Adamson (Risk and Sustainable Management Group, University of Queensland); Sarah Chambers (Risk and Sustainable Management Group, University of Queensland); Peggy Schrobback (Risk & Sustainable Management Group, School of Economics, University of Queensland)
    Abstract: Climate change is likely to have substantial effects on irrigated agriculture. Extreme climate events such as droughts are likely to become more common. These patterns are evident in median projections of climate change for the Murray–Darling Basin in Australia. Understanding climate change effects on returns from irrigation involves explicit representation of spatial changes in natural stocks (i.e. water supply) and their temporal variability (i.e. frequency of drought states of nature) and the active management responses to capital stocks represented by mitigation and alternative adaptation strategies by state of nature . A change in the frequency of drought will induce a change in the allocation of land and water between productive activities. In this paper, a simulation model of state-contingent production is used to analyze the effects of climate change adaptation and mitigation. In the absence of mitigation, climate change will have severe adverse effects on irrigated agriculture in the Basin. However, a combination of climate mitigation and adaptation through changes in land and water use will allow the maintenance of agricultural water use and environmental flows.
    Keywords: Irrigation, Uncertainty, Climate Change
    JEL: Q25 Q54
    Date: 2010–12
  5. By: Skoufias, Emmanuel; Essama-Nssah, B.; Katayama, Roy S.
    Abstract: The authors use regression analysis to assess the potential welfare impact of rainfall shocks in rural Indonesia. In particular, they consider two shocks: (i) a delay in the onset of monsoon and (ii) a significant shortfall in the amount of rain in the 90 day post-onset period. Focusing on households with family farm businesses, the analysis finds that a delay in the monsoon onset does not have a significant impact on the welfare of rice farmers. However, rice farm households located in areas exposed to low rainfall following the monsoon are negatively affected. Rice farm households appear to be able to protect their food expenditure in the face of weather shocks at the expense of lower nonfood expenditures per capita. The authors use propensity score matching to identify community programs that might moderate the welfare impact of this type of shock. Access to credit and public works projects in communities were among the programs with the strongest moderating effects. This is an important consideration for the design and implementation of adaptation strategies.
    Keywords: Science of Climate Change,Climate Change Mitigation and Green House Gases,Housing&Human Habitats,Rural Poverty Reduction,Regional Economic Development
    Date: 2011–03–01
  6. By: Michi Nishihara (Graduate School of Economics, Osaka University)
    Abstract: I investigate the decision-making process of an owner of abandoned farmland that is currently restricted to agricultural use but will be available for nonagricultural use in the future. I find that a slight probability of land conversion greatly increases the land value and discourages the owner from cultivating the land. I also observe that a small gap in the anticipation of land conversion prevents the owner from selling or leasing the land to a more efficient farmer.
    Keywords: real option, abandoned farmland, land development, land conversion.
    JEL: G13 Q15 R14
    Date: 2011–03
  7. By: John Cotter; Kevin Dowd; Wyn Morgan
    Abstract: Risk is an inherent feature of agricultural production and marketing and accurate measurement of it helps inform more efficient use of resources. This paper examines three tail quantile-based risk measures applied to the estimation of extreme agricultural financial risk for corn and soybean production in the US: Value at Risk (VaR), Expected Shortfall (ES) and Spectral Risk Measures (SRMs). We use Extreme Value Theory (EVT) to model the tail returns and present results for these three different risk measures using agricultural futures market data. We compare the estimated risk measures in terms of their size and precision, and find that they are all considerably higher than normal estimates; they are also quite uncertain, and become more uncertain as the risks involved become more extreme.
    Date: 2011–03
  8. By: John Quiggin (Risk and Sustainable Management Group, University of Queensland)
    Abstract: For much of the 20th century, the expansion of irrigated agriculture in the Murray Darling Basin, was treated as a self-evidently desirable objective, to be pursued without excessive regard to questions of economic costs and benefits. Irrigation seemed to offer a ‘droughtproofing’ solution to the risks and uncertainties that plague dryland agriculture in Australia. By the late 1980s, however, the capacity of the Basin to support additional diversions was close to exhaustion. Analysis at the time suggested, in the terminology of Randall (1981) that a move from an ‘expansion’ phase in which resource constraints were relatively unimportant, to a ‘mature’ phase, characterised by increasingly sharp conflicts over access to the resource, was underway. It was hoped that these conflicts could be resolved at low cost through the introduction of market mechanisms. In reality, however, as noted by Quiggin (2008), the actual outcome was a ‘crisis’ phase, in which the possibility of a systemic collapse loomed ever larger. The only feasible response, it has become evident, is a ‘contraction’ phase, in which claims to the resource are scaled back. Attempts to deal with the problems of the Basin through the creation of markets in water rights, minimising the role of governments, began with the communique of the 1994 Council of Australian Governments meeting and was developed more fully in the National Water Inititiative announced in 2004 (Council of Australian Governments 1994, 2004). The NWI was described by the National Water Commission as ‘Australia's enduring blueprint for water reform’, through which ‘governments across Australia have agreed on actions to achieve a more cohesive national approach to the way Australia manages, measures, plans for, prices, and trades water.’In practice, however, the NWI failed to resolve many of the key conflicts associated with the mature water economy. Come conflicts between states arose from the need to deal with different systems of water entitlements. Conflicts also emerged between states and within the Commonwealth over the extent to which trade in water entitlements should (or should not be restricted) and over the possibility of transfers of water from rural to urban use.
    Keywords: Murray Darling Basin,
    Date: 2010–11
  9. By: Swenson, David A.
    Abstract: This paper looks at practical limits to local foods production and consumption in the Upper Midwest.  It presumes that local foods production makes the most sense, and has the greatest profit potential, in relatively close proximity to dense urban demand.  The research demonstrates methods for determining county-level fresh fruit and vegetable production potentials for the states of Minnesota, Wisconsin, Illinois, Michigan, Indian, and Iowa in light of the distribution of metropolitan areas with 250,000 residents or more within or nearby the region.  It also estimates the farm production-related total economic values that would accumulate were local foods production goals achieved in the region using input-output modeling tools.   A state-only analysis was also conducted for Iowa using smaller metropolitan areas and a shorter viable distance-to-market threshold to apply the larger study’s insights in a manner that might guide state-level decision making.  The research can be useful for helping to inform state policy developments as well as the location and extent of Cooperative Extension and other types of state and local services and production assistance designed to bolster or further investigate this emerging rural development topic.
    Keywords: local foods; impact analysis
    Date: 2011–03–30
  10. By: Alexander Kadow
    Abstract: Fair Trade (FT) products such as coffee and textiles are becoming increasingly popular with altruistic consumers all over the world. This paper seeks to understand the economic effects of this grassroots movement which directly links ethically-minded consumers in industrialised countries with marginalised producers in developing economies. We extend the Ricardian trade model and introduce a FT sector in developing South that offers a fair wage – the FT premium. There are indeed positive welfare effects from FT but those come at the expense of rising inequalities within South which are in turn a rational by-product of FT. The degree of inequalities depends on the specifics of the cooperative structures in the FT sector. Given the rigidities and inequalities FT introduces and rests upon, this form of alternative trade appears to be only sustainable as niche movement.
    Keywords: Fair Trade, comparative advantage, wage premium, inequalities, ethical consumerism, cooperative
    JEL: F11 O11 Q13
    Date: 2011–02

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