nep-agr New Economics Papers
on Agricultural Economics
Issue of 2014‒03‒01
seventeen papers chosen by
Angelo Zago
University of Verona

  1. Food Security in Asia and the Pacific: The Rapidly Changing Role of Rice By Peter Timmer
  2. The Role of Mineral Fertilizers in Transforming Philippine Agriculture By Briones, Roehlano M.
  3. The effect of food prices and household income on the British diet By De Agostini, Paola
  4. Life Satisfaction, Contract Farming and Property Rights: Evidence from Ghana By Susanne Väth; Simone Gobien
  5. The agricultural invasion and the political economy of agricultural trade policy in Belgium, 1875-1900 By Maarten VAN DIJCK; Tom TRUYTS
  6. The Illiquidity of Water Markets By José-Antonio Espín-Sánchez; Javier Donna
  7. Rationality of Choices in Subsidized Crop Insurance Markets By Xiaodong Du; Hongli Feng; David A. Hennessy
  8. Can Public Employment Schemes Increase Equilibrium Wages? Evidence from a Natural Experiment in India By Erlend Berg; Sambit Bhattacharyya; D Rajasekhar; R Manjula
  9. Does Ethiopia’s Productive Safety Net Program Improve Child Nutrition? By Legesse Debela, Bethelhem; Shively, Gerald; Holden, Stein
  10. Local air pollution and global climate change taxes: a distributional analysis By Xaquín Garcia-Muros; Mercedes Burguillo; Mikel Gonzalez-Eguino; Desiderio Romero-Jordán
  11. Does land titling matter? The role of land property rights in the war on illicit crops in Colombia By Juan Carlos Muñoz-Mora; Santiago Tobón-Zapata; Jesse d'Anjou
  12. Food for Thought? Breastfeeding and Child Development By Emla Fitzsimons; Marcos Vera-Hernández
  13. The social rate of discount, climate change and real options By Pasquale Lucio Scandizzo
  14. Biodiversity Conservation in Asia By Dale Squires
  15. A resource pool for environmental innovation By Rasi Kunapatarawong; Ester Martinez Ros
  16. The sectorial impact of commodity price shocks in Australia By Stephen J. Knop; Joaquin L. Vespignani
  17. Unilateral climate policies and green paradoxes: Extraction costs matter By Gilbert Kollenbach

  1. By: Peter Timmer
    Abstract: Food security in Asia and the Pacific presents a frustrating paradox. At one level, huge progress has been made in the past half century in bringing most of the population out of poverty and hunger. Measured by the key determinants of food security—improved availability, access, utilisation and stability—food security has never been at higher levels. Large pockets of food-insecure populations remain in the region, especially in South Asia, and continued efforts to reach these households are necessary. At the same time, food security strategies in Asia are mostly in disarray. Most countries are protecting their rice farmers and providing high price supports, but high rice prices hurt the vast majority of the poor. Continued efforts to stabilise rice prices are understandable politically and desirable economically, but much more open trade regimes for rice will help food security throughout the region.
    Keywords: food security; role of rice; Asia and the Pacific; price stablisation; behavioural political economy
  2. By: Briones, Roehlano M.
    Abstract: Fertilizer policy in the country has evolved from pervasive interventionism in the 1970s to today`s market-oriented regime. Government has abandoned price policies and subsidies, focusing rather on standard setting, quality regulation, and training. Over the same period domestic demand for fertilizer has continually been increasing, though recently resurgent fertilizer prices have reduced total utilization. Evidence suggests that farmers are under-applying fertilizer, thereby forfeiting efficiency gains at the margin. On the supply side, imports have in the past few decades emerged, as the main source of fertilizer as domestic production has dwindled. With deregulation, numerous private sector players have taken over the distribution of fertilizers; analysis of the supply chain points to low marketing margins. Integration analysis fails to find systematic arbitrage opportunities between the domestic and world markets. Within the domestic market, however, there remain large disparities in prices across regions. Priorities for research and policy are therefore understanding the behavior of farmers in terms of fertilizer application and addressing internal price disparities, perhaps by improved transport infrastructure and logistics.
    Keywords: competition, Philippines, market integration, fertilizer policy, fertilizer demand
    Date: 2014
  3. By: De Agostini, Paola
    Abstract: This paper investigates the effect of price variations on the diet composition in Britain. It describes the dynamics of food demand in relation to food prices over time using data from the British National Food Survey (NFS) covering the period 1975-2000. Demand elasticities with respect to price elasticities are estimated by solving a quadratic almost ideal demand system (QUAIDS) model controlling also for total expenditure on food, region of residence, household size, age of head of household, whether women are working, number of time in which the household buys ready food, household type and income quartiles. Focusing on the consumption technology function, effects of food price variation on calories intake, energy from fats and energy from carbohydrate have been explored deriving nutrients elasticities with respect to variation of food prices.
    Date: 2014–02–21
  4. By: Susanne Väth (University of Marburg); Simone Gobien (University of Marburg)
    Abstract: Large-scale land acquisition has increased dramatically in recent years. The question whether land deals can benefit both the local population and the investor is therefore high on the international agenda. Contract farming is discussed as a possible solution but studies identifying the causal effects are rare. Using data from a quasi-natural experiment in contract allocation, we compare the subjective well-being of outgrowers and independent farmers in the sphere of the biggest palm oil producer in Ghana. We identify a positive causal effect of the outgrower scheme which increases subjective well-being by 1.5 points on a scale of 0 to 10. We find a substitutive relationship between having an outgrower contract and having property rights, and thus we argue that by increasing security a contract increases well-being, as secure rights to land matter substantially for the overall life satisfaction of non-contract but not of contract farmers.
    Keywords: contract farming, property rights, quasi-natural experiment, subjective well-being, large-scale land acquisition
    JEL: D60 I31 Q13
    Date: 2014
  5. By: Maarten VAN DIJCK; Tom TRUYTS
    Abstract: After 1875, cheap grain from the United States and Russia flooded the European markets. Many countries like Germany, France, and Sweden turned to agricultural trade protection, while others, like the UK and Denmark, held on to a free trade position. Belgium adopted a middle position, leaving its grain markets open but protecting animal husbandry, dairy production, and the processing of foodstuffs. The econometric analysis of the votes of Belgian Members of Parliament on four proposals to install protectionist measures on agricultural trade seeks to identify which economic or political interests explain the Belgian policy option.
    Date: 2014–01
  6. By: José-Antonio Espín-Sánchez; Javier Donna
    Abstract: In 1966, the irrigation community in Mula (Murcia, Spain) switched from a market (auction), which had been in place in the town for over 700 years, to a system of fixed quotas with a ban on trading, to allocate water from the town's river. We present a model, in which farmers face liquidity constraints to explain why the change took place. We show that water demand will be underestimated if liquidity constraints are present. We use a dynamic demand model and data from the market period to estimate the parameters of the model. We estimate both the demand for water and the financial constraints of the farmers, thus obtaining unbiased estimates. In our model, markets achieve the first-best allocation only in the absence of liquidity constraints. In contrast, the quota achieves the first-best allocation only if farmers are homogeneous in productivity. We compute welfare under both institutions using the estimated parameters. We find that the quota is more efficient than the market. This result implies that one should be cautious in advocating for water markets, especially in developing areas where liquidity constraints might be a concern.
    JEL: D02 D53 G14 Q25
    Date: 2014–02–18
  7. By: Xiaodong Du; Hongli Feng; David A. Hennessy (Center for Agricultural and Rural Development (CARD))
    Abstract: The U.S. crop insurance market has several features that set it apart from other insurance markets. These include:(a) explicit government subsidies with an average premium subsidy rate of about 60% in recent years; and (b) the legislative requirement that premium rates be set at actuarially fair levels, where the federal government sets rates and pays all costs related to insurance policy sales and services. Bearing these features in mind, we examine to what extent farmers’ crop insurance choices conform to economic theory. A standard expected utility maximization framework is set up to analyze tradeoffs between higher risk protection and larger subsidy payments. Given an actuarially fair premium, a rational farmer should choose either the coverage level with the highest premium subsidy or a higher coverage level. Evidence from a large insurance unit level dataset contradicts this theoretical inference, and so suggests anomalous insurance decisions. Mixed logit estimation reveals that larger out-of-pocket premium reduces the probability that an insurance product is chosen.
    Keywords: actuarial fairness; behavioral anomalies; premium subsidy; under-insurance. JEL Classification: D03, H25, Q18. Highlights: • Under standard economic theory, farmers should choose subsidized crop insurance contracts at high coverage levels. • Scrutiny of contract choice data shows that farmers underinsure their crops. • A mixed logit model suggests that behavior is motivated by aversion to incurring out-of-pocket premiums.
    Date: 2014–02
  8. By: Erlend Berg; Sambit Bhattacharyya; D Rajasekhar; R Manjula
    Abstract: We estimate the impact of the Indian government’s major rural public works programme, the National Rural Employment Guarantee (NREG), on agricultural wages. The rollout of NREG in three phases is used to identify difference-in-difference estimates of the programme effect. Using monthly wage data from the period 2000-2011 for a panel of 209 districts across 18 Indian states, we find that on average NREG boosts the growth rate of real daily agricultural wages 4.8 per cent per year. The effect is concentrated in some states and in the agricultural season. The effect appears to be gender-neutral and biased towards unskilled labour. We argue that rural public employment programmes constitute a potentially important anti-poverty policy tool.
    Keywords: public works; workfare; agricultural wages; NREG; India
    Date: 2014–01
  9. By: Legesse Debela, Bethelhem (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Shively, Gerald (Centre for Land Tenure Studies, Norwegian University of Life Sciences); Holden, Stein (Centre for Land Tenure Studies, Norwegian University of Life Sciences)
    Abstract: We study the link between Ethiopia’s Productive Safety Net Program (PSNP) and short-run nutrition outcomes among children age 5 years and younger. We use 2006 and 2010 survey data from Northern Ethiopia to estimate parameters of an exogenous switching regression. This allows us to measure the differential impacts of household characteristics on weight-for-height Z-score of children in member and non-member households in PSNP. We find that the magnitude and significance of household covariates differ in samples of children from PSNP and non-PSNP households. Controlling for a set of observable features of children and households we find that children in member households have weight-for-height Z-scores that are 0.55 points higher than those of children in non-member households. We conclude that the PSNP is providing positive short-term nutritional benefits for children, especially in those households that are able to leverage underemployed female labor.
    Keywords: anthropometrics; Ethiopia; food security; nutrition; safety net
    JEL: I15 I38
    Date: 2014–02–18
  10. By: Xaquín Garcia-Muros; Mercedes Burguillo; Mikel Gonzalez-Eguino; Desiderio Romero-Jordán
    Abstract: Local air pollution and global climate change are two significant environmental problems which are interrelated. Some recent papers examine them together, but most of the relevant literature has focused either on climate change alone or on the ancillary benefits of mitigating it (in terms of air pollution). In regard to distribution, most publications have focused on the impacts of climate change-related taxes such as excise duties on CO2, energy or fuels. This paper explores the distributional implications of policies for taxing local air pollution and compares them with climate change taxes. The framework of taxation on air pollution is based on the estimated damage associated with the main local air pollutants, while the climate change framework is based on a CO2 tax. The case of Spain is examined, using an Input-Output model in combination with a micro-simulation model. The distributional implications of a revenue-neutral tax reform are also explored. We find that taxes on local pollutants are more regressive than those levied on climate change pollutants, because the goods implicitly taxed have a greater weight in the consumer basket of low income groups, even if the tax revenues are recycled.
    Keywords: Environmental Tax Reform; Distributional Impact; Local air pollution taxes; global climate change taxes
    Date: 2014–02
  11. By: Juan Carlos Muñoz-Mora (Université Libre de Bruxelles); Santiago Tobón-Zapata (Fondo para el Financiamiento del Sector Agropecuario); Jesse d'Anjou (Université Libre de Bruxelles)
    Abstract: This paper analyzes the role of formalization of land property rights in the war against illicit crops in Colombia. We argue that as a consequence of the increase of state presence and visibility during the period of 2000 and 2009, municipalities with a higher level of formalization of their land property rights saw a greater reduction in the area allocated to illicit crops. We hypothesize that this is due to the increased cost of growing illicit crops on formal land compared to informal, and due to the possibility of obtaining more benefits in the newly in- stalled institutional environment when land is formalized. We exploit the variation in the level of formalization of land property rights in a set of municipalities that had their first cadastral census collected in the period of 1994-2000; this selection procedure guarantees reliable data and an unbiased source of variation. Using fixed effects estimators, we found a significant negative relationship between the level of formalization of land property rights and the number of hectares allocated to coca crops per municipality. These results remain robust through a number of sensitivity analyses. Our findings contribute to the growing body of evidence on the positive effects of formal land property rights, and effective policies in the war on drugs in Colombia.
    Keywords: Land property rights; Coca crops; War on drugs.
    Date: 2014–02
  12. By: Emla Fitzsimons (Department of Quantitative Social Science, Institute of Education, University of London); Marcos Vera-Hernández (University College London)
    Abstract: We show that children who are born at the weekend or just before are less likely to be breastfed, owing to poorer breastfeeding support services at weekends. We use this variation to estimate the effect of breastfeeding on children’s development for a sample of uncomplicated births from low educated mothers. We find that breastfeeding has large effects on children’s cognitive development, but not on non-cognitive development or health. Regarding mechanisms, we estimate how breastfeeding affects parental investments in the child and the quality of the mother-child relationship.
    Keywords: Breastfeeding; timing of birth; hospital support; instrumental variables; optimal instruments; cognitive and non-cognitive development; health.
    JEL: I14 I18 J13
    Date: 2014–02–17
  13. By: Pasquale Lucio Scandizzo (CEIS University of Rome "Tor Vergata")
    Abstract: This paper examines the controversial problem of the choice of the social discount rate in development projects, by focusing on the investment required to adapt to climate change, considering the threats to food security and the needs for human and natural capital, especially for developing countries. Because climate change introduces negative trends and time increasing volatilities both in production and in consumption, social rates of discount can only be estimated within a framework of dynamic uncertainty. For this purpose, climate change can be modeled as a twin stochastic process of the geometric Brownian motion variety, affecting both consumption and productive capacity. Unlike the case of deterministic neoclassical growth, and contrary to the usual estimates for project evaluation, the stochastic nature of climate changes links the social discount rate (SDR) to volatility in two distinct and important ways. On the side of consumption and growth, the SDR is reduced by the likely negative effects of climate change (CC) on growth and food security. It also becomes dependent on the fact that the volatility of growth favors the accumulation of precautionary savings and thus reduces the rate of fall of the value of consumption over time. On the side of production capacity, the SDR is also reduced by the negative effect of CC on the productivity of capital and by the fact that the opportunity cost of the displacement of private investment under dynamic uncertainty is lowered by the value of the options to invest when more information will be available.
    Keywords: social, discount, uncertainty, climate change
    JEL: H8 D1 Q5
    Date: 2014–02–18
  14. By: Dale Squires
    Abstract: Asian's remarkable economic growth brought many benefits but also fuelled threats to its ecosystems and biodiversity. Economic growth brings biodiversity threats but also conservation opportunities. Continued biodiversity loss is inevitable, but the types, areas and rates of biodiversity loss are not. Prioritising biodiversity conservation, tempered by what is tractable, remains a high priority. Policy and market distortions and failures significantly underprice biodiversity, undermine ecosystems and create perverse incentives, leading to over-consumption and under-conservation. Properly priced biodiversity creates price signals and incentives that account for all contributions from biodiversity and ecosystems. Habitat conservation remains the centrepiece of biodiversity conservation. The next steps forward include selected command-and-control measures and economic policies that eliminate perverse incentives and creating positive ones along with improved enforcement.
    Keywords: Asia; biodiversity conservation; policy; sustainable growth; economic incentives
  15. By: Rasi Kunapatarawong; Ester Martinez Ros
    Abstract: This paper reports research on the relationship between sourcing strategy of a firm and its environmental innovation propensity. The data is taken from the Spanish TechnologicalInnovation Panel (PITEC) survey during the period of 2007-2011. The uniqueness of the Spanish innovation structure and the increasing relevance of environmental issues for the Spanish economy make it a proper setting to investigate environmental innovation dynamics. The results from 5,352 firms indicate that large firms are more likely to undertake environmental innovation than small- and medium-sized firms (SMEs). These firms rely quite equally on all four sources of knowledge &- internal, market, institutional and freely-available sources &- when deciding to develop environmental innovation. The broad horizons with respect to knowledge sources are likely to increase firms' propensity to introduce environmental innovation. In addition, weprovide the evolutionary nature of firm's innovation search as firms grow in size. Small firmsrely on both internal and freely-available sources rather equally, while internal source is the most relevant for medium firms, and market is the most important source used by large firms indriving environmental innovation. Particularly important is how firms who are already innovators and who receive local funding from the Spanish government are more likely to introduce environmental innovation.
    Keywords: Environmental innovation , Knowledge sourcing , Discrete choice model
    Date: 2014–02
  16. By: Stephen J. Knop; Joaquin L. Vespignani
    Abstract: It is found that commodity price shocks largely affect the mining, construction and manufacturing industries in Australia. However, the financial and insurance sector is found to be relatively unaffected. Mining industry profits and nominal output substantially increase in response to commodity price shocks. Construction output is also found to increase significantly, especially in response to a bulk commodities shock, as a result of increased demand for resource related construction. Increased demand for construction has a positive spillover effect to parts of the manufacturing industry that supply the construction sector with intermediate inputs, such as the non-metallic mineral sub industry. In contrast, other manufacturing sub industries with only tenuous links to the resources sector such as textiles, clothing and other manufacturing, are relatively unresponsive to commodity price shocks.
    Keywords: Commodity prices, Commodity shocks, Australian economy
    JEL: E00 E30 F20
    Date: 2014–02
  17. By: Gilbert Kollenbach
    Abstract: Under which conditions unilateral tightening of climate policy causes a weak or strong green paradox or even decreases social welfare has recently been studied by Hoel (2011). Hoel assumes that the costs of extracting fossil fuel are linear in output. We extend his model by allowing for progressively increasing and stock dependent extraction costs. Increasing unit costs imply the simultaneous utilization of fossil fuel and a clean backstop. This has a signicant effect on the results, as the utilization of backstop by the country which tightens its climate policy always prevents a weak green paradox. As a consequence, the effect of a tighter climate policy on social welfare can be reversed. Due to the stock dependence of extraction costs the amount of fossil fuel left in situ may be increased by a tighter climate policy. This implies that social welfare may increase, even if a weak green paradox occurs.
    Keywords: Climate change, green paradox, exhaustible resources, renewable energy
    JEL: Q41 Q42 Q54 Q58
    Date: 2014

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