nep-agr New Economics Papers
on Agricultural Economics
Issue of 2017‒11‒12
thirteen papers chosen by

  1. Role of the US Reclamation Service and Bureau of Reclamation in the early 20th century \the crop revenue of the first five projects \ By Takuro Hidaka
  2. The Causes and Consequences of the Spatial Organization of Agriculture in Brazil By Pellegrina, Heitor S.
  3. An Empirical Analysis of Livelihood Strategies and Food Insecurity in Turkana County, Kenya By John Kamau Gathiaka; Moses Kinyanjui Muriithi
  4. Water and local development in Huamantanga: a pathway interpretation of opportunities and risks of the Law of Compensation and Reward Mechanisms for Ecosystem Services in Peru By Bastiaensen, Johan; Velarde, Patricia; Pérez, Katya; Van Hecken, Gert; De Bièvre, Bert
  5. Energy Price Reform: A Guide for Policymakers By David Coady; Ian Parry; Baoping Shang
  7. Measuring political and economic institutions in Ethiopia: c.1888 –2016 By Biniam E. Bedasso
  8. Public preferences and valuation of new malaria risk By Mehmet Kutluay; Roy Brouwer; Haripriya Gundimeda; Nitin Lokhande; Richard S. J. Tol
  9. Uneven growth in the extensive margin: explaining the lag of agricultural economies By Ourens, Guzmán
  10. EU ETS- broken beyond repair ? An analysis based on Faster principles By Xavier Timbeau; Pawel Wiejski
  11. Permit allocation rules and investment incentives in emissions trading systems By Florens Flues; Kurt van Dender
  12. The Safe Carbon Budget By Rick van der Ploeg
  13. Animal Welfare and Human Ethics: A Personality Study By Konstanze Albrecht; Florentin Krämer; Nora Szech

  1. By: Takuro Hidaka (Graduate School of Economics, Osaka University)
    Abstract: The US Reclamation Service (1902-1923) and Bureau of Reclamation (1923 - ) of the Department of Interior conducted many reclamation projects in the west. This paper examines the first five of them, with special focuses on the role played by this federal agency for the agricultural revenue per acre in each project area. The profitability seems to have been affected by (1) the profit from industrial crops, such as sugar beets and cotton, (2) national trends of agricultural prices, (3) local, geographical factors of each area (precipitation excluded). It should be borne in mind that the two agencies were reluctant to be directly involved in improvement of the agricultural conditions in the region, though they showed some interests in agriculture itself. As a result, choices of crops, solution of inundation damage, improvement of agricultural knowledge, and other challenges in the local agriculture were left to the private sector and other authorities. We can find some of their contributions, but their role was confined to irrigation for agricultural water supply partly because the officials were ill-prepared at the initial stage and mainly because of the small budget. However, the irrigation had fundamental importance for the future development in each region. It was the foundation for the mixed agriculture of fodder crops and animal husbandry, and cultivation of industry crops which brought in much higher cash income. Based on this foundation, later development projects, conducted by other Federal and local offices, private companies as well as individual farmers, were made possible. While the contributions made by the reclamation agencies were limited, their construction of water infrastructure had considerable significance.
    Keywords: Water resource development, Crops, Irrigation farming, Bureau of Reclamation, American history
    JEL: N41 N42 N51 N52
    Date: 2017–11
  2. By: Pellegrina, Heitor S.
    Abstract: Why are there vast differences in agricultural activity across space? How do these differences shape the aggregate impact of agricultural shocks? To address these questions, I build a quantitative general equilibrium model that accounts for rich spatial differences in agriculture and use comprehensive county-level data from Brazil to estimate the model. I find that differences in natural advantages and factor intensities are key causes of the spatial patterns of agricultural specialization but that differences in trade costs across crops play a minor role. In addition, I study two major shocks in Brazilian agriculture: the adaptation of soybeans to tropical regions and the rise in the Chinese demand for commodities. The results show that general equilibrium effects substantially shaped the returns to agricultural research, the impact of tropical soybeans on urbanization, and the gains from trade with China.
    Keywords: Agricultura, Comercio internacional, Economía, Investigación socioeconómica,
    Date: 2017
  3. By: John Kamau Gathiaka; Moses Kinyanjui Muriithi
    Abstract: The pastoral communities of Turkana in northern Kenya have for ages satisfied their economic, social and cultural needs through nomadic pastoralism. But due to increasing frequency of drought and market shocks, the ability of age-old strategies to shield these pastoralists from poverty and food insecurity has declined. With only livestock and social capital as the main assets in a communal property regime, it is not clear which of the various livelihood strategies that these pastoralists pursue can shield households from drought and market shocks and guarantee their food security. This study investigates the livelihood strategies as pursued by pastoralists in Turkana County with a view to identify strategies that can effectively shield households from shocks. Data for the study is sourced from the Kenya Integrated Household Budget Survey (KIHBS) 2005/06. Available literature is used to identify livelihood strategies in Turkana, while the KIHBS data is used to establish the population of people pursuing each strategy. Anova and Bonferroni tests give evidence of the existence of four livelihood strategies using food expenditure ratio as the categorizing variable. Probit regression is used to estimate the determinants of food insecurity in Turkana, while multinomial logit regression is used to do further analysis on the determinants of livelihood strategies. The findings suggest correlation between food insecurity and livelihood strategies. Policies that target livelihood strategies may have implications on food security in Turkana. However, further analysis is required to confirm the reverse causality between livelihood strategies and food insecurity.
    Date: 2017–09
  4. By: Bastiaensen, Johan; Velarde, Patricia; Pérez, Katya; Van Hecken, Gert; De Bièvre, Bert
    Abstract: Peru is one of the first countries in the world to introduce a specific law for the promotion and regulation of Payments for Ecosystem Services (PES). This ‘Law on Compensation and Reward Mechanisms for Ecosystem Services’ (MRSE-Law) mainly aims to protect and restore ecosystems that provide critical services to the Peruvian population, including hydrological services for year round water provisioning. Since many of the water-related services are produced and affected by poor communities in the uplands of critical watersheds, the PES-arrangements under the MRSE-Law are also held to contribute to reduce poverty and exclusion of and within these communities. Through a case-study of an innovative water management initiative in the village of Huamantanga, which could potentially benefit from the new mechanisms under the MRSE-Law, this paper adopts a pathways perspective to study the risks and opportunities of a water-related PES-arrangement in line with the MRSE-Law. It shows how such an arrangement is inevitably articulated with and embedded within the on-going power-laden institutional bricolage that generates the currently dominant ‘alfalfa-cattle market pathway’, which tends to undermine peasant community control and increases privatization and social differentiation. This raises concerns about the ultimate impact of the proposed MRSE-project, which might end up dispossessing poorer local farmers from their access to the mountain pastures without providing adequate alternatives. However, the participatory and peasant-community based features of the incubating process and the flexible MRSE-legal provisions provide some opportunities to counterbalance this emerging risk.
    Keywords: Peru; Payments for Ecosystem Services; PES
    Date: 2017–09
  5. By: David Coady; Ian Parry; Baoping Shang
    Abstract: This essay reviews the conceptual and quantitative literature on the efficient system of fossil fuel energy prices in different countries for reflecting supply and environmental costs, as well as the environmental, fiscal, and economic benefits from energy price reform. Drawing on recent experiences in numerous countries, the ingredients for successful reform are then discussed (e.g., the need for a comprehensive reform strategy and for compensating vulnerable groups). Low energy prices, fiscal pressures, and momentum for climate action provide an especially conducive environment for price reform and much is happening rapidly on the ground, however there is a long way to go to reap the enormous benefits at stake (e.g., at the global level, over a 20 percent reduction in carbon emissions and revenues gains of 4 percent of GDP).
    Keywords: energy price reform, efficient taxation, environmental externalities, reform experiences
    JEL: Q31 Q38
    Date: 2017
  6. By: Valeria Costantini; Giorgia Sforna; Anil Markandya; Elena Paglialunga
    Abstract: The UNFCCC Parties Paris Agreement entered into force on 4 November 2016 represents a step forward in involving all countries in mitigation actions, even though still based on a voluntary approach and lacking the involvement of some major polluting countries. The underinvestment in mitigation actions depends on market and policy failures and the absence of market signals internalizing the economic losses due to climatic damage contributes to underestimating potential benefits from global action. We highlight how crucial is the vulnerability of a country to climate change in defining the threat and action strategies. A dynamic climate-economy CGE model is developed by including a monetary evaluation of regional damages associated with climate change. By considering alternative damage estimations, results show that internalizing climatic costs changes the bargaining position of countries in climate negotiations. Consequently, damage costs should be given greater importance when defining the implementation of a global climate agreement.
    Keywords: Climate change damage costs; Climate negotiations; Burden sharing; Mitigation costs; GTAP; CGE.
    JEL: C68 H23 O44 Q54
    Date: 2017–10
  7. By: Biniam E. Bedasso
    Abstract: This paper presents the first ever set of indices of political and civil rights and land rights in Ethiopia spanning more than a century. We have extracted information from legal texts and historical records. Then we quantified legislative developments in an attempt to objectively measure de jure political and economic institutions over the existence of the modern Ethiopian state. The results show that political institutions have improved gradually even though there is a tendency of retracting some rights recently. Land rights have never been more extensive than in the 1960s. The land reform of the late 1970s achieved a more equitable distribution of land at the expense of a shrinking set of rights.
    Date: 2017–10
  8. By: Mehmet Kutluay (Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam/Rotterdam); Roy Brouwer (Department of Economics, University of Waterloo, Canada; Institute for Environmental Studies, Vrije Universiteit, Amsterdam); Haripriya Gundimeda (Department of Economics, IIT Bombay, Mumbai); Nitin Lokhande (Department of Economics, IIT Bombay, Mumbai); Richard S. J. Tol (Department of Economics, University of Sussex; Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Department of Spatial Economics, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam; CESifo, Munich)
    Abstract: After years of decline, malaria prevalence may increase in the future due to climate change, and spread to areas that have not experienced the disease before. Any policy that aims to mitigate or adapt to this scenario needs to take into account the economic benefits of avoided malaria (willingness to pay - WTP). Much work has been done on WTP, but not much is known about how WTP changes with the probability of becoming ill. To this end a survey is carried out in Mumbai, India, to compare respondents' WTP to avoid malaria across risky and less-risky areas. We find WTP to be 10% higher in risky areas than in less-risky areas. We also observe WTP to increase by more than 15% between malaria-experienced and naïve respondents, indicating a familiarity premium. These findings indicate higher welfare returns to climate change mitigation policies than previously thought.
    Keywords: malaria; willingness to pay; discrete choice experiment
    JEL: I12 Q51
    Date: 2017–10
  9. By: Ourens, Guzmán
    Abstract: This paper documents that growth in the extensive margin is on average lower in the agricultural sector than in other activities. We introduce this new fact into a simple model of trade to show its relevance for regions specialized in the lagging sector. Diversity-loving consumers endogenously reduce the share of their expenditure devoted to that sector. The region specialized in it receives a decreasing share of world income, which results in diverging income and welfare trajectories with respect to the rest of the world. Appropriating a decreasing share of world value pushes downward the relative wage of the agricultural re- gion and lowers the price of its exports relative to that of its imports, resulting in terms of trade deterioration. This result, supported by empirical evidence, separates our theoretical results from those obtained in a similar model of un- even output growth between sectors. We present empirical evidence for the main testable results of the model. Our model is the first replicating these facts with- out the need of heterogeneous consumers or products, nor resorting to political or institutional explanations.
    Keywords: diversification, agricultural economies, growth, welfare
    Date: 2017–11
  10. By: Xavier Timbeau (OFCE-Sciences PO Paris, France); Pawel Wiejski (European Affairs Programme of Sciences Po Paris)
    Abstract: The EU ETS is one of the main European climate policies, covering 45 percent of EU’s greenhouse gas emissions. Its main goal is to limit emissions cost-effectively, and to trigger innovations using a strong price signal, making low-carbon technologies more competitive. While emissions reduction targets for 2020 have already been achieved, the exact role of the ETS in this success remains controversial. The assessment is crucial, as more and more countries and regions plan to adopt similar policies to achieve their targets expressed in the Intended Nationally Determined Contributions, communicated at the Paris Conference of the Parties. The EU ETS, as the longest running and largest carbon market in the world, will undoubtedly serve as a point of reference. This paper attempts to provide a comprehensive analysis of the policy. First part outlines the historical development of emission trading systems, as well as the development of the EU ETS since its inception in 2005. Second part uses FASTER principles developed by the World Bank and the OECD to perform a multi-criteria, qualitative analysis of the EU ETS in its current form. Third part concentrates on the upcoming revision for the fourth phase, evaluating whether the proposals correctly address the policy’s shortcomings. It also provides some alternative reform proposals.
    Keywords: Cap-and-trade, EU ETS, Market stability reserve, Carbon price
    JEL: H23 H87 Q56
    Date: 2017–10–26
  11. By: Florens Flues (OECD); Kurt van Dender (OECD)
    Abstract: This paper argues that, in situations where choices are made between mutually exclusive investment projects and where there are economic rents, free allocation of tradable emission permits in emissions trading systems can weaken incentives for firms to invest in less carbon-intensive technologies compared to the case where permits would be auctioned. The reason is that permit allocation rules affect economic rents differentially when different product benchmarks apply to products that are close substitutes. Examples of permit allocation rules favouring more emission-intensive technologies for outputs that are close substitutes are found in the California Cap and Trade Program and in the European Union Emissions Trading System. This lack of technology-neutrality is exacerbated in the long run as future patterns of substitutability between technologies are uncertain. Free permit allocation can broaden support for carbon pricing, but this paper shows that this carries a cost in terms of environmental effectiveness if it discourages investment in low-carbon assets.
    Keywords: average carbon prices, benchmarks, California Cap and Trade Program, carbon pricing, decarbonisation, emissions trading systems, EU ETS, permit allocation, technology neutrality
    JEL: D04 H23 H32 L51 Q48
    Date: 2017–11–15
  12. By: Rick van der Ploeg
    Abstract: Cumulative emissions drive peak global warming and determine the safe carbon budget compatible with staying below 2oC or 1.5oC. The safe carbon budget is lower if uncertainty about the transient climate response is high and risk tolerance low. Together with energy costs this budget determines the constrained welfare-maximizing carbon price and how quickly fossil fuel is replaced by renewable energy and how much of it is abated. This price is the sum of a gradual damages component familiar from the unconstrained optimal carbon price highlighted in economic studies and a Hotelling component for the additional price needed to ensure that the safe carbon budget is never violated familiar from IAM studies. If policy makers ignore damages, as in the cost-minimizing temperature constraint literature, a more rapidly rising carbon price results. The alternative of adjusting damages upwards to factor in the peak warming constraint leads initially to a higher carbon price which rises less rapidly.
    Keywords: peak warming target, climate uncertainty, risk tolerance, Pigouvian damages, Hotelling rule, carbon price
    JEL: Q54
    Date: 2017
  13. By: Konstanze Albrecht; Florentin Krämer; Nora Szech
    Abstract: We revisit the long-standing question whether there is a relation between animal welfare and human ethics. Therefore, we elicit concern for animal welfare in an incentivized, direct, and real setup: Subjects choose between intensive farming versus organic living conditions for a hen. Guaranteeing organic living conditions is costly, but implies organic feed, access to daylight, and more space. We compare the interest in animal welfare with morally relevant dispositions in subjects, relying on well-established measures such as Machiavellianism scores and the Big 5 personality test. The data confirm a strong, positive relation between caring for animal welfare and moral dispositions.
    Keywords: animal welfare, human ethics, experiment, sustainability
    JEL: D01 D62 D69
    Date: 2017

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