nep-agr New Economics Papers
on Agricultural Economics
Issue of 2014‒04‒18
sixteen papers chosen by
Angelo Zago
University of Verona

  1. Agricultural Trade, Biodiversity Effects and Food Price Volatility By Cecilia Bellora; Jean-Marc Bourgeon
  2. A policy agenda for agricultural development in Kazakhstan By Petrick, Martin; Gramzow, Andreas; Oshakbaev, Dauren; Wandel, Jürgen
  3. The Impact of migration on rural poverty and inequality: a case study in China By Nong Zhu; Xubei Luo
  4. The Welfare Impact of Land Redistribution: Evidence from a Quasi-Experimental Initiative in Malawi By Mariapia Mendola; Franklin Simtowe
  5. The Illiquidity of Water Markets By Donna, Javier; Espin-Sanchez, Jose
  6. Unfavorable Land Endowment, Cooperation, and Reversal of Fortune By Litina, Anastasia
  7. Revealed Comparative Advantage and Half-A-Century Competitiveness of Canadian Agriculture: A Case Study of Wheat, Beef and Pork Sectors By Sarker, Rakhal; Ratnesena, Shashini
  8. Impact of seasonality-adjusted flexible microcredit on repayment and food consumption : experimental evidence from rural Bangladesh By Shonchoy, Abu S.; Kurosaki, Takashi
  9. Consumers’ valuation of national versus foreign varieties of tomatoes: results of a contingent valuation study in Portugal By Anabela Botelho; Isabel Dinis; Lina Sofia Lourenço-Gomes; Jorge Moreira; Lígia M.Costa Pinto
  10. Public expenses, credit and natural capital: Substitution or complementarity? By Pascale COMBES MOTEL; Jean-Louis COMBES; Philippe DELACOTE
  11. On the effects of world stock market and oil price shocks on food prices: An empirical investigation based on TVPVAR models with stochastic volatility By Ikram Jebabli; Mohamed Arouri; Frédéric Teulon
  12. Food Expenditure and GST in New Zealand By Christopher Ball; John Creedy; Michael Ryan
  13. Italian agri-food exports in the international arena By Carbone, Anna; Henke, Roberto; Pozzolo, Alberto Franco
  14. Valuation of Small and Multiple Health Risks: A Critical Analysis of SP Data Applied to Food and Water Safety By Henrik Andersson; Arne Risa Hole; Mikael Svensson
  15. Does a Renewable Fuel Standard for Biofuels Reduce Climate Costs? By Mads Greaker; Michael Hoel; Knut Einar Rosendahl
  16. Optimal Investment in Ecological Rehabilitation under Climate Change By Anke D Leroux; Stuart M Whitten

  1. By: Cecilia Bellora (THEMA and INRA - UMR Economie Publique); Jean-Marc Bourgeon (THEMA and INRA - UMR Economie Publique, Department of Economics, Ecole Polytechnique - CNRS : UMR7176 - Polytechnique - X)
    Abstract: We examine the importance of production risks in agriculture due to biotic elements such as pests in determining the pattern of trade and the distribution of prices in a Ricardian two-country setup. These elements create biodiversity eff ects that result in an incomplete specialization at the free trade equilibrium. Their influence on idiosyncratic production risks evolves depending on the countries' openness to trade. Pesticides allow these eff ects to diminish but they are damaging for the environment and human health. When regulating farming practices, governments have to counterbalance these side-eff ects with the competitiveness of their agricultural sector on international markets. Nevertheless, restrictions on pesticides under free trade are generally more stringent than under autarky.
    Keywords: agricultural trade, food prices, agrobiodiversity, pesticides
    Date: 2014–04–02
  2. By: Petrick, Martin; Gramzow, Andreas; Oshakbaev, Dauren; Wandel, Jürgen
    Abstract: Kazakhstan is now widely regarded as a key player on world agricultural markets, with considerable export potential in the wheat, beef and dairy sectors. Based on unique farm-level data, we offer new insights into the constraints that hamper further economic growth and provide an assessment of the Kazakhstani government's agricultural development strategy. Most managers in the farm survey doubt that agricultural investments deliver a sufficiently reliable return required for credit funding and thus do not take loans. In the cattle sector, there are significant problems in year-round fodder supply. The value chains for beef and dairy are bifurcated into an import-dependent chain for industrially processed products serving urban consumers, and a local chain of raw products serving rural consumers and urban bazaars. The government's modernisation strategy focuses on providing subsidised capital, but underestimates the knowledge and incentive problems inherent to such measures. The government should rather provide impartial and reliable public services to the sector, ensuring that the weakest links in food chain development are identified and private entrepreneurs are incentivised to strengthen them. Our evidence suggests that a bundle of measures designed to improve the local institutional environment of agriculture is more important than massive state funding of certain production lines. --
    Date: 2014
  3. By: Nong Zhu; Xubei Luo
    Abstract: Large numbers of agricultural labor moved from the countryside to cities after the economic reforms in China. Migration and remittances play an important role in transforming the structure of rural household income. This paper examines the impact of rural-to-urban migration on rural poverty and inequality in a mountainous area of Hubei province using the data of a 2002 household survey. Since migration income is a potential substitute of farm income, we present counterfactual scenarios of what rural income, poverty, and inequality would have been in the absence of migration. Our results show that, by providing alternatives to households with lower marginal labor productivity in agriculture, migration leads to an increase in rural income. In contrast to many studies that suggest the increasing share of non-farm income in total income widens inequality, this paper offers support for the hypothesis that migration tends to have egalitarian effects on rural income for three reasons: (i) migration is rational self-selection – farmers with higher expected return in agricultural activities and/or in local non-farm activities choose to remain in countryside while those with higher expected return in urban non-farm sectors migrate; (ii) households facing binding constraints of land shortage are more likely to migrate; (iii) poorer households benefit disproportionately from migration.
    Keywords: Migration, poverty, inequality, China,
    JEL: D63 O15 Q12
    Date: 2014–01–01
  4. By: Mariapia Mendola (University of Milan Bicocca, Centro Studi Luca d\'Agliano and IZA); Franklin Simtowe (African Centre for Social research and Economic Development, Nairobi)
    Abstract: Even though land reform may be an effective means of reducing poverty, evidence on its causal effects is scant. This paper uses household panel data combined with a quasi-experimental program to assess the impact of a joint Malawi/World Bank land redistribution project on households’ productivity and well-being in southern Malawi. Double difference and matching methods are used to address sources of bias in identifying impacts. Results point to average positive effects of the land program on land holdings, agricultural output, income, food security and asset ownership of beneficiary households, while the latter do not see an improvement in access to social services such as schools and health care facilities. There is also evidence of heterogeneous effects by gender and inheritance systems. Overall, our findings suggest that there is scope for reducing poverty and inequality in developing countries by implementing a market- and community-based approach to land reform through the provision of land to land-poor households.
    Keywords: Land Reform, Program Evaluation, Community Based Rural Land Development Program, Malawi
    JEL: O13 Q15
    Date: 2014–04–07
  5. By: Donna, Javier; Espin-Sanchez, Jose
    Abstract: We explore a particular historical episode that switched from a market institution (auctions) to a non-market institution (fixed quotas with a ban on trading) to allocate water. This water is used by farmers for agricultural purposes; some of the farmers are liquidity constraints. We present a model in which farmers face liquidity constraints to explain why the change took place. From a positive perspective, we show that demand is underestimated if these liquidity constraints are not taken into account. We use a dynamic discrete choice model to estimate demand during the auction period; we also estimate the probability of being liquidity constrained by a farmer. From a normative perspective, auctions achieve the first-best allocation only in the absence of liquidity constraints; the quota achieves the first best allocation only if farmers are homogeneous in productivity. We compute the welfare under both institutions using the estimated parameters of the structural model.
    Keywords: Organization of Production, Institutions, Financial Markets, Market Efficiency, Water
    JEL: D02 D53 G14 L23 Q25
    Date: 2014–02
  6. By: Litina, Anastasia (University of Luxembourg)
    Abstract: This research advances the hypothesis that reversal of fortunes in the process of economic development can be traced to the effect of natural land productivity on the desirable level of cooperation in the agricultural sector. In early stages of development, unfavorable land endowment enhanced the economic incentive for cooperation in the creation of agricultural infrastructure that could mitigate the adverse effect of the natural environment. Nevertheless, despite the benefcial effects of cooperation on the intensive margin of agriculture, low land productivity countries lagged behind during the agricultural stage of development. However, as cooperation, and its persistent effect on social capital, have become increasingly important in the process of industrialization, the transition from agriculture to industry among unfavorable land endowment economies was expedited, permitting those economies that lagged behind in the agricultural stage of development, to overtake the high land productivity economies in the industrial stage of development. Exploiting exogenous sources of variations in land productivity across countries the research further explores the testable predictions of the theory. It establishes that: (i) reversal of fortunes in the process of development can be traced to variation in natural land productivity across countries. Economies characterized by favorable land endowment dominated the world economy in the agricultural stage of development but were overtaken in the process of industrialization; (ii) lower level of land productivity in the past is associated with higher levels of contemporary social capital; (iii) cooperation, as reflected by agricultural infrastructure, emerged primarily in places were land was not highly productive and collective action could have diminished the adverse effects of the environment and enhance agricultural output.
    Keywords: Land productivity, Cooperation, Social Capital, Trust, Economic development, Agriculture, Industrialization
    Date: 2013
  7. By: Sarker, Rakhal; Ratnesena, Shashini
    Abstract: While the competitiveness of the Canadian agri-food sector attracted significant research attention since the mid 1980s, no study has measured competitiveness using longitudinal data and determined empirically the drivers of competitiveness. This article contributes to the competitiveness literature by measuring the international competitiveness of wheat, beef and pork sectors in Canada using data from 1961 to 2011 and by determining the drivers of competitiveness. Our results demonstrate that Canada enjoys competitiveness in the wheat sector but not in the beef or pork sectors. Empirical results also suggest that the competitiveness of the Canadian wheat sector can be enhanced if the cost seed in Canada relative to that in the United States is lower. Similarly, if the relative labour cost of meat processing is lower, the competitiveness of both beef and pork sectors in Canada will be enhanced. Exchange rates are important drivers of international competitiveness of beef and pork sectors in Canada. The decoupled farm policies in Canada do not have a significant impact on the competitiveness of wheat and pork sectors in Canada. Our empirical results also highlight cases of significant policy failures in Canada.
    Keywords: Competitiveness, Measurement, Normalized Revealed Comparative Advantage, Wheat, beef and pork sectors, Drivers of Competitiveness, Agribusiness, Agricultural and Food Policy, International Relations/Trade,
    Date: 2014–03
  8. By: Shonchoy, Abu S.; Kurosaki, Takashi
    Abstract: The mismatch between credit repayments and income seasonality poses a challenge for microfinance institutions (MFIs) working in developing countries. For instance, in northern Bangladesh, income and consumption downfalls during the lean season after the transplanting of major paddy crops are a serious threat to a household's economy. Poor landless agricultural wage laborers suffer the most owing to this seasonality as they face difficulties in smoothing their consumption. However, in designing microcredit products, MFIs do not usually provide flexibility or seasonal adjustment during the lean season. This is mainly because MFIs are afraid that such flexibility might break the repayment discipline of borrowers, resulting in higher default rates. We thus conducted a randomized controlled trial in 2011-12 in northern Bangladesh to empirically test whether seasonality-adjusted flexible microcredit leads to an increase in repayment problems for MFIs as well as whether it can increase and stabilize consumption of borrower households. Our results suggest no statistically discernible difference among the treatment arms in case of default, overdue amount, or repayment frequency. On the other hand, we find no positive impact of repayment flexibility on immediate food consumption during the period of seasonality, except for in-kind full moratorium treatment group. After a year of initial intervention, however, we see positive changes in food intake during the lean season. Thus, our preliminary results are in favor of seasonality-adjusted flexible microcredit.
    Keywords: Bangladesh, Microfinance, Rural credit, Consumption, Microcredit, Default, Seasonality, Consumption Smoothing
    JEL: D12 G21 O16
    Date: 2014–03
  9. By: Anabela Botelho (NIMA, Universidade do Minho); Isabel Dinis; Lina Sofia Lourenço-Gomes (University of Trás-os-Montes and Alto Douro); Jorge Moreira (CERNAS, Instituto Politécnico de Coimbra, Escola Superior Agrária de Coimbra); Lígia M.Costa Pinto (NIMA, Universidade do Minho)
    Abstract: The identification and characterization of consumers’ preferences for agricultural products may constitute a valuable tool for producers in identifying market niches for their current production and to plan activity choice for the future. Traditional varieties of fruits and vegetables have been subject to some scrutiny in this respect. However, but for a few studies, consumers’ preferences for tomatoes have rarely been studied. Using the contingent valuation methodology applied to a panel of six different varieties of tomatoes (three national varieties, and three foreign varieties), the present paper provides evidence concerning the most relevant determinants of consumers’ willingness to pay, controlling for place and mode of production of the tomatoes’ varieties. In addition, the study elicits consumers’ rating of these varieties with respect to appearance, taste, smell and texture. Based on our multivariate results, the estimated market price premium for national varieties of tomatoes is 35% relatively to foreign varieties.
    Keywords: Valuation methods, Agro-food economics, elicitation of consumer preferences
    JEL: Q20 Q50 Q10
    Date: 2014–01
  10. By: Pascale COMBES MOTEL (Centre d'Etudes et de Recherches sur le Développement International); Jean-Louis COMBES (Centre d'Etudes et de Recherches sur le Développement International); Philippe DELACOTE (Institut National de la Recherche Agronomique (INRA))
    Abstract: Improving access to capital through credit and public spendings is an important step toward development and poverty alleviation. At the same time, deforestation-related activities, like agricultural expansion, can be seen as relying on natural capital, through the depletion of forest resources and the use of land in an extensive way. It is then important to better understand how a better access to capital influences the use of land as a natural capital. This paper assesses the relationship between financial development, public spendings and deforestation. Are they substitute or complement? Our econometric analysis shows that deforestation is positively correlated to access to credit and public spendings, which gives some evidence that natural capital is a complement to credit and public spendings.
    Keywords: deforestation, development, credit, public spendings
    JEL: Q33 O13 C21
    Date: 2014
  11. By: Ikram Jebabli; Mohamed Arouri; Frédéric Teulon
    Abstract: Transmission of price shocks from one market to another one has long been investigated in the economic literature. However, studies have namely dealt with the relationship between financial and energy markets. With the recent changes in market conditions, investors, policy-makers and interest groups are giving special attention to food market. This paper aims at analyzing shocks transmission between international food, energy and financial markets and to provide some insights into the volatility behavior during the past years and discuss its implications for portfolio management. To do this, we present a new Time Varying Parameter VAR model (TVP-VAR) with stochastic volatility approach which provides extreme flexibility with a parsimonious specification. We resort also to a generalized vector autoregressive framework in which forecast-error variance decompositions are invariant to the variable ordering for the assessment of total and directional volatility spillovers. Our main findings suggest that there is volatility spillover from crude oil and international stock markets to food markets. Shocks to crude oil or MSCI markets have immediate and short-term impacts on food markets which are emphasized during the financial crisis period. Moreover, we show that augmenting a diversified portfolio of food commodities with crude oil or stocks significantly increases its risk-adjusted performance.
    Keywords: Price volatility, TVP-VAR model, stochastic volatility, total volatility spillovers, directional volatility spillovers, food market, energy market, financial market, portfolios diversification, hedge effectiveness.
    Date: 2014–04–10
  12. By: Christopher Ball; John Creedy; Michael Ryan (New Zealand Treasury)
    Abstract: This paper has two main aims. First, the poor targeting of a policy of zero-rating food in a goods and services tax (GST) is illustrated in a simple model where the revenue lost from zero-rating food is instead devoted to a universal transfer payment, with a larger effect on progressivity. Second, the paper investigates the welfare effects on New Zealand households of zero-rating food. The detailed effects, for a range of household types, are then investigated using Household Economic Survey data. Demand responses to consumer price changes are estimated and welfare changes, in terms of equivalent variations, are obtained. Comparisons are made across ‘clusters’, consisting of groups of households with similar characteristics. The reform is seen to produce a very small amount of progressivity in the GST, with redistribution from richer households without children to poorer households with children, and older households.
    Keywords: H31; I3; D11
    Date: 2014–04
  13. By: Carbone, Anna; Henke, Roberto; Pozzolo, Alberto Franco
    Abstract: We study the performance of the so called Made in Italy agri-food exports over the last fifteen years, merging the strand of analysis that estimated price and demand elasticities with that considering more explicitly the role of product quality. We proceed in three steps. First, we estimate the elasticities of exports with respect to world imports, export prices and the competitors? prices, both at aggregate and product level. Second, we calculate an index of sophistication capturing the position of each product in different layers of world markets. Finally, we compare the outcomes of the estimates of the long-run elasticities with the changes in sophistication levels. The picture we got is a coherent synthesis of the tendencies and forces shaping world competition in the agri-food sector. Our results show that the strategy of Italian exporters varies according to the type of product and to the degree of market completion. In some cases, Italian exports contrast increasing world competition by increasing quality levels (i.e. their sophistication content); in other cases, price competition is chosen by keeping average unit values at lower levels than those of the competitors. All considered, in many cases, these strategies are successful in allowing Italy to defend and sometimes even to increase its positions in the world markets, in spite of a growing world competition.
    Keywords: export elasticities, export sophistication, Made in Italy, world demand
    JEL: Q17 F14
    Date: 2014–03–11
  14. By: Henrik Andersson (Toulouse School of Economics (LERNA)); Arne Risa Hole (University of Sheffield); Mikael Svensson (Karlstad University)
    Abstract: This study elicits individual preferences for reducing morbidity and mortality risk in the context of an infectious disease (campylobacter) using choice experiments. Respondents are in the survey asked to choose between different policies that, in addition to the two health risks, also vary with respect to source of disease being targeted (food or water), when the policy takes place (in time), and the monetary cost. Our results in our baseline model are in line with expectations; respondents prefer the benefits of the program sooner than later, programs that reduce both the mortality and morbidity risk, and less costly programs. Moreover, our results suggest that respondents prefer water- compared with food-safety programs. However, a main objective of this study is to examine scope sensitivity of mortality risk reductions using a novel approach. Our results from a split-sample design suggest that the value of the mortality risk reduction, defined as the value of a statistical life, is SEK 3 177 (USD 483 million) and SEK 50 million (USD 8 million), respectively, in our two sub-samples. This result cast doubt on the standard scope sensitivity tests in choice experiments, and the results also cast doubt on the validity and reliability of VSL estimates based on stated preference (and revealed preference) studies in general. This is important due to the large empirical literature on non-market evaluation and the elicited values' central role in policy making, such as benefit-cost analysis.
    Keywords: choice experiments; morbidity risk; mortality risk; scope sensitivity; willingness to pay
    JEL: D61 H41 I18 Q51
    Date: 2014–04
  15. By: Mads Greaker (Statistics Norway); Michael Hoel (University of Oslo); Knut Einar Rosendahl (Statistics Norway)
    Abstract: Recent literature on biofuels has questioned whether biofuels policies are likely to reduce the negative effects of climate change. In this paper we make two contributions to the literature. First, we study the market effects of a renewable fuel standard in a dynamic model taking into account that oil is a non-renewable resource. Second, we model emissions from land use change explicitly when we evaluate the climate effects of the renewable fuel standard. We find that global extraction of oil is postponed as a consequence of the renewable fuel standard. Thus, if emissions from biofuels are negligible, the standard will have beneficial climate effects. Furthermore, we find that the standard also tends to reduce total fuel (i.e., oil plus biofuels) consumption initially. Hence, even if emissions from biofuels are non-negligible, a renewable fuel standard may still reduce climate costs. In fact our simulations show that even for biofuels that are almost as emissions-intensive as oil, a renewable fuel standard has beneficial climate effects.
    Keywords: Blending Mandate, Renewable Fuel Standard, Biofuels, Climate Costs
    JEL: Q27 Q41 Q54
    Date: 2014–03
  16. By: Anke D Leroux; Stuart M Whitten
    Abstract: Ecological rehabilitation is subject to a variety of risks affecting the likely return on investment. We propose a real options approach to valuing and ranking individual rehabilitation projects, accounting for irreversible investment and the effects of climate change on species loss, future rehabilitation benefits and frequency of catastrophic events. The allocation of voluntary rehabilitation contracts on the basis of option pricing results in significantly greater value for money for the Government as compared with the conventional cost-effectiveness criterion as is illustrated for the case of Box Gum Grassy Woodland rehabilitation in Australia.
    Keywords: real options; biodiversity; irreversibility; risk; extinction debt, Box Gum Grassy Woodlands
    Date: 2014–04

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