nep-agr New Economics Papers
on Agricultural Economics
Issue of 2018‒05‒14
25 papers chosen by

  2. On the role of probability weighting on WTP for crop insurance with and without yield skewness By Douadia Bougherara; Laurent Piet
  3. Zoning change, anticipation behaviour and land value: a case study on overage payments By Arno Van der Vlist; Ed F. Nozeman; Terry van Dijk
  4. Geography and Agricultural Productivity: Cross-Country Evidence from Micro Plot-Level Data By Tasso Adamopoulos; Diego Restuccia
  5. Time vs. State in Insurance: Experimental Evidence from Contract Farming in Kenya By Casaburi, Lorenzo; Willis, Jack
  6. The multifaceted relationship between environmental risks and poverty: new insights from Vietnam By Narloch, Ulf; Bangalore, Mook
  7. Resilience thresholds to temperature shocks in rural Tanzania: a long-run assessment. By Marco d'Errico; Marco Letta; Pierluigi Montalbano; Rebecca Pietrelli
  8. China's mobility barriers and employment allocations By Ngai, L. Rachel; Pissarides, Christopher; Wang, Jin
  9. Estimating the Value of Crop Diversity Conservation Services Provided by the Czech National Programme for Agrobiodiversity By Nicholas Tyack; Milan Scasny
  10. The Impact of Climate Conditions on Economic Production. Evidence from a Global Panel of Regions By Kalkuhl, Matthias; Wenz, Leonie
  11. Neocolonialism or Balanced Partnership? Reframing Agricultural Relations Between the EU and Africa By Lungu, Ioana
  12. Effects of Water Quality, Sanitation, Handwashing, and Nutritional Interventions on Child Development in Rural Kenya (WASH Benefits Kenya): A Cluster-Randomised Controlled Trial By Christine P. Stewart; Patricia Kariger; Lia Fernald; Amy J. Pickering; Charles D. Arnold; Benjamin F. Arnold; Alan E. Hubbard; Holly N. Dentz; Audrie Lin; Theodora J. Meerkerk; Erin Milner; Jenna Swarthout; John M. Colford; Jr.; Clair Null
  13. Determinants of Agricultural Technology Adoption in Chókwè District, Mozambique By Ponguane, Sérgio; Mucavele, Nézia
  14. ‘Getting to Denmark’: the Role of Elites for Development By Jensen, Peter Sandholt; Lampe, Markus; Sharp, Paul
  15. Cutting with both arms of the scissors: the economic and political case for restrictive supply-side climate policies By Green, Fergus; Denniss, Richard
  16. Impact of private labels and information campaigns on organic and fair trade food demand By Douadia Bougherara; Carole Ropars-Collet; Carole Jude Saint-Gilles
  17. Counterfactual comparisons of investment options for wind power and agricultural production in the United States: Lessons from Northern Ohio By Alexandre Ribeiro Scarcioffolo; Fernanda Finotti Perobelli, Ariaster Baumgratz Chimeli
  18. Water Content in Trade: A Regional Analysis for Morocco By Eduardo Amaral Haddad; Fatima Ezzahra Mengoub; Vinicius A. Vale
  19. Agriocliometrics and Agricultural Change in the Nineteenth and Twentieth Centuries By Vicente Pinilla
  21. Monetary policy spillovers, global commodity prices and cooperation By Filardo, Andrew; Lombardi, Marco; Montoro, Carlos; Ferrari, Massimo
  22. Strategic Default in the International Coffee Market By Blouin, Arthur; Macchiavello, Rocco
  23. Global Melting? The Economics of Disintegration of the Greenland Ice Sheet By William D. Nordhaus
  24. Impact of delivering iron-fortified salt through a school feeding program on child health, education and cognition: Evidence from a randomized controlled trial in rural India By Krämer, Marion; Kumar, Santosh; Vollmer, Sebastian
  25. Firm and Market Response to Saving Constraints: Evidence from the Kenyan Dairy Industry By Casaburi, Lorenzo; Macchiavello, Rocco

  1. By: Jasmien De Winne; Gert Peersman (-)
    Abstract: For a panel of 75 countries, we find that increases in global agricultural commodity prices that are caused by unfavorable harvest shocks in other regions of the world significantly curtail domestic economic activity. The effects are much larger than for average global agricultural price shifts. The impact is also considerably stronger in high-income countries, despite the lower shares of food in household expenditures these countries have compared to low-income countries. On the other hand, we find weaker effects in countries that are net exporters of agricultural products, have higher shares of agriculture in GDP or lower shares of non-agricultural trade in GDP; that is, characteristics that typically apply to low-income countries. When we control for these country characteristics, we find indeed that the effects on economic activity become smaller when income per capita is higher. Overall, our findings imply that the consequences of climate change on advanced economies are likely larger than previously thought.
    Keywords: Agricultural commodity prices, economic activity, climate change
    JEL: E32 F44 O13 O44 Q11 Q54
    Date: 2018–04
  2. By: Douadia Bougherara; Laurent Piet
    Abstract: A growing number of studies in finance and economics seek to explain insurance choices using the assumptions advanced by behavioral economics. One recent example in agricultural economics is the use of cumulative prospect theory (CPT) to explain farmer choices regarding crop insurance coverage levels (Babcock, 2015). We build upon this framework by deriving willingness to pay (WTP) for insurance programs under alternative assumptions, thus extending the model to incorporate farmer decisions regarding whether or not to purchase insurance. Our contribution is twofold. First, we study the sensitivity of farmer WTP for crop insurance to the inclusion of CPT parameters. We find that loss aversion and probability distortion increase WTP for insurance while risk aversion decreases it. Probability distortion in losses plays a particularly important role. Second, we study the impact of yield distribution skewness on farmer WTP assuming CPT preferences. We find that WTP decreases when the distribution of yields moves from negatively- to positively-skewed and that the combined effect of probability weighting in losses and skewness has a large negative impact on farmer WTP for crop insurance.
    Keywords: crop insurance, cumulative prospect theory, premium subsidy; skewness
    JEL: D81 Q10 Q12 Q18
    Date: 2018–05
  3. By: Arno Van der Vlist; Ed F. Nozeman; Terry van Dijk
    Abstract: Capitalization effects in agricultural land value of a regional planning design are investigated. A recent case on regional design in which property rights are well-defined is used to theorize on market value of agricultural land in a situation of re-zoning. Our case-study shows that land prices increased rapidly in anticipation of a zoning change which reflects the underlying option value. Legal transfer documents furthermore reveal that overage clauses are agreed upon by parties as well. These overage clauses will be exercised ex post only if the regional design is successfully completed to anticipated zoning and land-use. This finding has important theoretical implications as such overage payments have neither been considered in appraisal standards, nor of compensation schemes in expropriation. Our theoretical stand is that ex-post overage payments while important drivers in bargaining are not part of existing definitions of property value. Our case shows that at odds to international valuation standards these agreed overage payments are nevertheless included by the Dutch Tax Authority in a recent tax claim.
    Keywords: anticipation effects; capitalization effect; Land Use Change; overage clause; retrospective-payments
    JEL: R3
    Date: 2017–07–01
  4. By: Tasso Adamopoulos; Diego Restuccia
    Abstract: Why is agricultural productivity so low in poor countries relative to the rest of the world? Is it due to geography or constrained economic choices? We assess the quantitative role of geography and land quality for agricultural productivity differences across countries using high-resolution micro-geography data and a spatial accounting framework. Our rich spatial data provide in each cell of land covering the entire globe actual yields of cultivated crops and potential yields for 18 crops, which measure the maximum attainable output for each crop given soil quality, climate conditions, terrain topography, and a level of cultivation inputs. While there is considerable heterogeneity in land quality across space, even within narrow geographic regions, we find that low agricultural productivity in poor countries is not due to poor land endowments. If countries produced current crops in each cell according to potential yields, the rich-poor agricultural yield gap would virtually disappear, from more than 200 percent to less than 5 percent. We also find evidence of additional productivity gains attainable through the spatial reallocation of production and changes in crop choices.
    JEL: O1 O11 O13 O14 O4
    Date: 2018–04
  5. By: Casaburi, Lorenzo; Willis, Jack
    Abstract: The gains from insurance arise from the transfer of income across states. Yet, by requiring that the premium be paid upfront, standard insurance products also transfer income across time. We show that this intertemporal transfer can help explain low insurance demand, especially among the poor, and in a randomized control trial in Kenya we test a crop insurance product which removes it. The product is interlinked with a contract farming scheme: as with other inputs, the buyer of the crop offers the insurance and deducts the premium from farmer revenues at harvest time. The take-up rate for pay-at-harvest insurance is 72%, compared to 5% for the standard pay-upfront contract, and the difference is largest among poorer farmers. Additional experiments and outcomes provide evidence on the role of liquidity constraints, present bias, and counterparty risk, and find that enabling farmers to commit to pay the premium just one month later increases demand by 21 percentage points.
    Date: 2018–04
  6. By: Narloch, Ulf; Bangalore, Mook
    Abstract: Despite complex interlinkages, insights into the multifaceted relationship between environmental risks and poverty can be gained through an analysis of different risks across space, time and scale within a single context using consistent methods. Combining geo-spatial data on eight environmental risks and household survey data from 2010–2014 for the case study of Vietnam, this paper shows: (i) at the district level, the incidence of poverty is higher in high risk areas, (ii) at the household level, poorer households face higher environmental risks, (iii) for some risks the relationship with household-level consumption varies between rural and urban areas, and (iv) environmental risks explain consumption differences between households, but less so changes over time. While altogether these analyses cannot establish a causal relationship between environmental risks and poverty, they do indicate that Vietnam's poor are disproportionally exposed. Given growing pressures due to climate change, addressing such risks should be a focus of poverty reduction efforts.
    Keywords: climate change; consumption; environment; livelihood; poverty; risks; vulnerability
    JEL: I3 I30 I32 O10 Q50 Q54 R20
    Date: 2018–04–05
  7. By: Marco d'Errico (Food and Agriculture Organization of the United Nations); Marco Letta (Department of Economics and Social Sciences, Sapienza University of Rome (IT).); Pierluigi Montalbano (Department of Economics and Social Sciences, Sapienza University of Rome (IT).); Rebecca Pietrelli (Food and Agriculture Organization of the United Nations)
    Abstract: The study of household resilience is a key issue in development economics. This paper adds to the literature by exploring the role of resilience in mediating the relationship between food consumption growth and temperature shocks. To make up for the lack of long micro panels, we generate a synthetic panel for rural Tanzania covering the time span 2000 – 2013. Our main contribution is the identification of resilience thresholds below which households are unable to absorb the negative effects of temperature shocks. These thresholds have important implications for adaptation to climate change in developing countries and, more generally, significant consequences for policy-makers and intervention design.
    Keywords: Resilience thresholds, Food security, Household growth, Temperature shocks, Climate change.
    JEL: I32 O12 Q12 Q54
    Date: 2018–02
  8. By: Ngai, L. Rachel; Pissarides, Christopher; Wang, Jin
    Abstract: China's hukou system imposes two main barriers to population movements. Agricultural workers get land to cultivate but are unable to trade it in a frictionless market. Social transfers (education, health, etc.) are conditional on holding a local hukou. We show that the land policy leads to over-employment in agriculture and it is the more important barrier to industrialization. Effective land tenure guarantees and a perfect competitive rental market would correct this inefficiency. The local restrictions on social transfers favour rural enterprises over urban employment with a relatively smaller impact on industrialization.
    Keywords: Chinese immigration; Chinese land policy; imperfect rental market; mobility barriers; hukou registration; social transfers
    JEL: J61 O18 R23
    Date: 2018–03
  9. By: Nicholas Tyack (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; The Graduate Institute of International and Development Studies, Geneva); Milan Scasny (Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic; Charles University Environment Center, Prague)
    Abstract: We estimate the willingness-to-pay (WTP) for conserving crop varieties for ten years in the Czech Republic using a double-bounded dichotomous choice model to analyze data collected with an online contingent valuation survey administered to a main country-wide sample of 1037 respondents and a smaller sub-sample of 500 representative of the agricultural region of South Moravia. Mean WTP was found to be about $9 for both the Czech and S. Moravian sub-samples, corresponding to country-wide benefits of $68 million. These benefits increase by 5% for every ten varieties conserved, implying total welfare benefits of $80 million for a program conserving the maximum number of 35 additional crop varieties. The study reveals the previously unmeasured social benefits of crop conservation activities in the Czech Republic, and illustrates an empirical approach of potential value for policymakers responsible for determining funding levels for genetic resource conservation.
    Keywords: Crop diversity; plant genetic resources for food and agriculture (PGRFA); public goods; contingent valuation; double-bounded dichotomous choice
    JEL: Q18 Q51 Q57
    Date: 2018–04
  10. By: Kalkuhl, Matthias; Wenz, Leonie
    Abstract: We estimate the impacts of climate on economic growth using Gross Regional Product (GRP) for more than 1,500 regions in 77 countries. In temperate and tropical climates, annual temperature shocks reduce GRP whereas they increase GRP in cold climates. With respect to long-term climate conditions, one degree of temperature increase reduces output by 2-3%. The effect of annual or long-term precipitation is found to be less important and less robust among specifications. For projected global warming of 4°C until 2100, we find that regions lose 9\% of economic output on average and more than 20% of output in tropical regions.
    Keywords: climate change,climate damages,climate impacts,growth regression
    JEL: E23 O11 Q54 Q56
    Date: 2018
  11. By: Lungu, Ioana
    Abstract: The media narratives with respect to EU external policies and their effects on developing countries generally paint a picture of unequal power dynamics and negative externalities, particularly with respect to international trade and land grabbing. In this paper, I use trade data to argue that reality is more nuanced and aim to provide a preliminary sketch of the institutional dynamics between the EU and Africa. I focus on agricultural relationships to highlight the interplay between historical path dependencies, colonialism, trade policy and domestic institutions on the EU and African side. While trade is often portrayed in an overly simplified manner as the main factor hindering agricultural development, African countries are often plagued by a long history of extractive institutions, both politically and economically, which lead to a vicious cycle of unequally distributed resources, exploitation, insecure human rights and a lack of incentives for innovation. This becomes apparent when examining phenomena such as land-grabbing, which often involve African elites partnering with foreign investors to conclude controversial deals. Overall, this paper aims to highlight the necessity of building institutional capacity particularly in countries with a long history of extractive institutional continuity, and to underline the importance of state centralisation for agricultural development, so that African partners can fully take advantage of the preferential trade regime with the EU and improve their position with respect to power dynamics.
    Keywords: Agricultural Economics,Development,International Trade,Agricultural Policy,Governance,Foreign Assistance,Institution Building,Institutions,Least Developed Countries,Trade Liberalization
    JEL: O19 O13 O17 O24 Q15 O20
    Date: 2017
  12. By: Christine P. Stewart; Patricia Kariger; Lia Fernald; Amy J. Pickering; Charles D. Arnold; Benjamin F. Arnold; Alan E. Hubbard; Holly N. Dentz; Audrie Lin; Theodora J. Meerkerk; Erin Milner; Jenna Swarthout; John M. Colford; Jr.; Clair Null
    Abstract: Poor nutrition and infectious diseases can prevent children from reaching their developmental potential. We aimed to assess the effects of improvements in water, sanitation, handwashing, and nutrition on early child development in rural Kenya.
    Keywords: water quality, sanitation, handwashing, nutritional interventions, child development, rural Kenya
    JEL: F Z
  13. By: Ponguane, Sérgio; Mucavele, Nézia
    Abstract: The main objective of this work was to analyze the factors influencing the adoption of agricultural technologies in Chókwé district. In order to carry out the study, a sample of 150 farmers from the administrative posts of Lionde, Chókwè-sede, Xilembene and Macarretane obtained through a randomized stratified sampling approach was submitted to the survey to obtain primary data. Based on a bivariate probit model, factors that influence the adoption of two agricultural technologies, namely improved seed and mechanization were identified. The results show that factors such as schooling, farm size, purchasing power and market access influence the adoption of improved seed and mechanization. On the other hand, access to extension services reduces the propensity to adopt improved seed.
    Keywords: technology adoption; bivariate probit; productivity; Chókwè
    JEL: Q18
    Date: 2018–04–04
  14. By: Jensen, Peter Sandholt (University of Southern Denmark); Lampe, Markus (Vienna University of Economics and Business); Sharp, Paul (University of Southern Denmark, CAGE, CEPRAuthor-Name: Skovsgaard, Christian Volmar; University of Southern Denmark)
    Abstract: We explore the role of elites for development and in particular for the spread of cooperative creameries in Denmark in the 1880s, which was a major factor behind that country’s rapid economic catch-up. We demonstrate empirically that the location of early proto-modern dairies, so-called hollænderier, introduced onto traditional landed estates as part of the Holstein System of agriculture by landowning elites from the Duchies of Schleswig and Holstein in the eighteenth century, can explain the location of cooperative creameries in 1890, more than a century later, after controlling for other relevant determinants. We interpret this as evidence that areas close to estates which adopted the Holstein System witnessed a gradual spread of modern ideas from the estates to the peasantry. Moreover, we identify a causal relationship by utilizing the nature of the spread of the Holstein System around Denmark, and the distance to the first estate to introduce it, Sofiendal. These results are supported by evidence from a wealth of contemporary sources and are robust to a variety of alternative specifications.
    Keywords: Institutions, technology, cooperatives, dairying JEL Classification: N53, O13, Q13
    Date: 2018
  15. By: Green, Fergus; Denniss, Richard
    Abstract: Proponents of climate change mitigation face difficult choices about which types of policy instrument(s) to pursue. The literature on the comparative evaluation of climate policy instruments has focused overwhelmingly on economic analyses of instruments aimed at restricting demand for greenhouse gas emissions (especially carbon taxes and cap-and-trade schemes) and, to some extent, on instruments that support the supply of or demand for substitutes for emissions-intensive goods, such as renewable energy. Evaluation of instruments aimed at restricting the upstream supply of commodities or products whose downstream consumption causes greenhouse gas emissions—such as fossil fuels—has largely been neglected in this literature. Moreover, analyses that compare policy instruments using both economic and political (e.g. political “feasibility” and “feedback”) criteria are rare. This article aims to help bridge both of these gaps. Specifically, the article demonstrates that restrictive supply-side policy instruments (targeting fossil fuels) have numerous characteristic economic and political advantages over otherwise similar restrictive demand-side instruments (targeting greenhouse gases). Economic advantages include low administrative and transaction costs, higher abatement certainty (due to the relative ease of monitoring, reporting and verification), comprehensive within-sector coverage, some advantageous price/efficiency effects, the mitigation of infrastructure “lock-in” risks, and mitigation of the “green paradox”. Political advantages include the superior potential to mobilise public support for supply-side policies, the conduciveness of supply-side policies to international policy cooperation, and the potential to bring different segments of the fossil fuel industry into a coalition supportive of such policies. In light of these attributes, restrictive supply-side policies squarely belong in the climate policy “toolkit”.
    JEL: N0
    Date: 2018–03–12
  16. By: Douadia Bougherara; Carole Ropars-Collet; Carole Jude Saint-Gilles
    Abstract: We use Almost Ideal Demand Systems (AIDS) models estimated by the nonlinear seemingly unrelated regression (SUR) method on scanner data (i) to examine the demand for ecolabeled food products (organic and fair trade) as a function of the good having a private label (PL) or a national brand (NB) and (ii) to assess the impact of information campaigns promoting organic and fair trade products. We find that while demand is elastic for NB organic milk and NB fair trade coffee, it is inelastic for their PL counterpart. As for organic eggs, demand is always inelastic. Cross-price elasticities show substitutability between ecolabeled and conventional goods but only within the NB goods (milk and eggs) and within the PL goods (milk and coffee), but also complementarity between NB conventional and PL ecolabeled goods (milk and coffee). Finally, we find that while information campaigns increase the predicted expenditure shares of PL organic milk by 33%, of NB fair trade coffee by 50%, they decrease the predicted expenditure shares of PL conventional eggs but only by 3%. These effects are non-lasting.
    Keywords: organic, Fair trade, information campaign
    JEL: D12 Q5 D82
    Date: 2018–05
  17. By: Alexandre Ribeiro Scarcioffolo; Fernanda Finotti Perobelli, Ariaster Baumgratz Chimeli
    Abstract: We analyze potential efficiency gains in wind power projects by comparing counterfactual investment decisions in two different scenarios under a real options framework. The first scenario is a standard wind power investment, where the investor rents the land from local farms. In the second scenario, the wind power investor buys the land and commercializes both electricity and crop production, thus shortening the revenue risk through the diversification. Both scenarios have a waiting option, with the wholesale prices leading the installation decision. We model the electricity price as a mean reverting process with jumps and with different jumping probabilities for the different seasons of the year. Corn prices follow a mean reverting process. The waiting flexibility was modeled as a bundle of European options. The results indicate that the waiting option is exercised in 100% of our simulations in both scenarios, suggesting the still important role of government policies to stimulate wind power. More importantly, in more than 90% of the simulations, the second scenario brought value to the investment. Furthermore, net present values are more sensitive to reductions in capital costs than electricity prices. These results can form the basis for more effective policies for the wind power sector.
    Keywords: Wind Energy; Corn; Real Options Framework; Investment decision
    JEL: G23 Q42 Q48
    Date: 2018–04–11
  18. By: Eduardo Amaral Haddad; Fatima Ezzahra Mengoub; Vinicius A. Vale
    Abstract: This paper reports the results of an application using an interregional input-output matrix for Morocco together with regional information on water consumption by sectors. We develop a trade-based index that reveals the relative water use intensities associated with specific interregional and international trade flows. We estimate, for each flow associated with each origin-destination pair, measures of trade in value added and trade in water that are further used to calculate our index. We add to the existing literature on virtual water flows by encompassing the subnational perspective in the case study of a country that shows a “climate divide”: while a great part of the southern territory is located in the Sahara Desert, with serious water constraints, the northern part is relatively more privileged with access to this natural resource. Furthermore, we compare that Trade-Based Index of Water Intensity to similar metrics related to the use of other natural resources.
    Date: 2018–04
  19. By: Vicente Pinilla (Universidad de Zaragoza and Instituto Agroalimentario de Aragon -IA2- (Universidad de Zaragoza-CITA), Spain)
    Abstract: Before the industrial revolution, agriculture was the most important economic activity of traditional societies. The spread of industrialisation processes, first throughout a large part of the western world and later across many more countries, gave rise to an abundance of literature on the role of agriculture in these processes. The initial perspectives offered by economic history, particularly for the British case, and the approaches of development economics specialists, largely based on previous studies by economic historians, became subject to reconsideration when numerous studies emerged that, from a cliometric point of view, sought to evaluate the changes experienced by agriculture and their contribution to economic growth. In this context, the objective of this study is to use these contributions to analyse the profound transformations that have occurred in agriculture around the world over the last two centuries.
    Keywords: Economic History, Cliometrics, Agricliometrics, Agricultural Production, Agricultural Productivity, Technological Change, Agricultural Trade, Globalisation, Agricultural Policies, Agrarian Institutions
    JEL: N01 N50 Q10
    Date: 2018–05
  20. By: Luca Salvatici; Alessandro Antimiani; Fusacchia Ilaria
    Abstract: Production and trade are increasingly organized within Global Value Chains (GVCs) and therefore assessing who effectively pays the cost of protection is not straightforward. Since exports rely on imported inputs, the evaluation of trade policies requires the use of new trade metrics on a value-added base in order to assess in which country the value embedded in trade has been actually produced. We define a new set of trade policy indexes in the spirit of the protection indexes introduced by Anderson and Neary, based on the value added in trade: the Value Added Trade Restrictiveness Indexes (VATRIs). VATRIs are theoretically sound protection measurements that make use of the trade flow decomposition proposed by the recent value added in trade literature. We compute the direct and indirect components of trade protection by computing the VATRIs using the Global Trade Analysis Project computable general equilibrium model.
    Keywords: Trade policies, Trade Restrictiveness Index (TRI), Value-added trade, Global Trade Analysis Project (GTAP), Global Value Chains (GVCs), Value added trade.
    JEL: F13 C67
    Date: 2018–05
  21. By: Filardo, Andrew (Bank for International Settlements); Lombardi, Marco (Bank for International Settlements); Montoro, Carlos (Banco Central de Reserva del Perú; Ministerio de Economia y Finanzas); Ferrari, Massimo (Università Cattolica del Sacro Cuore)
    Abstract: How do monetary policy spillovers complicate the trade-offs faced by central banks face when responding to commodity prices? This question takes on particular relevance when monetary authorities find it difficult to accurately diagnose the drivers of commodity prices. If monetary authorities misdiagnose commodity price swings as being driven primarily by external supply shocks when they are in fact driven by global demand shocks, this conventional wisdom – to look through the first-round effects of commodity price fluctuations – may no longer be sound policy advice.
    Keywords: commodity prices, monetary policy, spillovers, global economy
    JEL: E52 E61
    Date: 2018–02
  22. By: Blouin, Arthur (University of Toronto); Macchiavello, Rocco (London School of Economics)
    Abstract: This paper studies strategic default on coffee pre-financing agreements. In these common arrangements, mills finance coffee production through loans backed by forward-sales contracts with foreign buyers. We model how strategic default introduces a trade-off between insurance and counterparty risk: relative to indexed contracts, fixed-price contracts insure against price swings but create incentives to default when market conditions change. To test for strategic default, we construct contract-specific measures of unanticipated changes in market conditions by comparing spot prices at maturity with the relevant futures prices at the contracting date. Unanticipated rises in market prices increase defaults on fixed price contracts but not on priceindexed ones. We isolate strategic default by focusing on unanticipated rises at the time of delivery after production decisions are sunk. Estimates suggest that roughly half of the observed defaults are strategic. Strategic defaults are more likely in less valuable relationships which, in turn, tend to sign price-indexed contracts to limit strategic default. A model calibration suggests that strategic default causes 15.8% average losses in output, significant dispersion in the marginal product of capital and sizeable negative externalities on supplying farmers.
    Keywords: Strategic Default, Contractual Forms, Counterparty Risk. JEL Classification: D22, L14, G32, O16.
    Date: 2018
  23. By: William D. Nordhaus (Cowles Foundation, Yale University)
    Abstract: Concerns about the impact on large-scale earth systems have taken center stage in the scientific and economic analysis of climate change. The present study analyzes the economic impact of a potential disintegration of the Greenland Ice Sheet (GIS). The method is to combine a small geophysical model of the GIS with the DICE integrated assessment model. The result shows that the GIS is likely to disappear over the next millennium or so without climate policy, but an active climate policy may prevent the GIS from crossing the threshold of irreversibility. Additionally, the study estimates the impact of the GIS on the social cost of carbon (SCC) and finds that adding GIS dynamics would add less than 5% to the SCC under alternative discount rates and estimates of the GIS dynamics. Simulations of geo-engineering options indicate that the dynamics of disintegration and rebuilding are extremely asymmetric, implying that GIS disintegration should be treated as irreversible.
    Keywords: Climate change, Environment, Ice sheets, DICE model
    JEL: Q5 Q54 H4
    Date: 2018–04
  24. By: Krämer, Marion; Kumar, Santosh; Vollmer, Sebastian
    Abstract: We present experimental evidence on the impact of delivering double-fortified salt (DFS), salt fortified with iron and iodine, through the Indian school-feeding program called “midday meal” on anemia, cognition, and math and reading outcomes of primary school children. We conducted a field experiment that randomly provided one-year supply of DFS at a subsidized price to public primary schools in one of the poorest regions of India. The DFS treatment had significantly positive impacts on hemoglobin levels and reduced the prevalence of any form of anemia by 9.3 percentage points (or about 20 percent) but these health gains did not translate into statistically significant impacts on cognition and test scores. While exploring the heterogeneity in effects, we find that treatment had statistically significant gains in anemia and test scores among children with higher treatment compliance. We further estimate that the intervention was very cost effective and can potentially be scaled up rather easily.
    Keywords: Double-fortified salt,education,anemia,school feeding,India,randomized controlled trial
    JEL: C93 I1 O11
    Date: 2018
  25. By: Casaburi, Lorenzo (University of Zurich); Macchiavello, Rocco (London School of Economics)
    Abstract: Despite extensive evidence that preferences are often time-inconsistent, there is only scarce field evidence of willingness to pay for commitment. Infrequent payments may naturally provide commitment for lumpy expenses. Multiple experiments in the Kenyan dairy sector show that: i) farmers are willing to incur sizable costs to receive infrequent payments and demand for commitment is an important driver of this preference; ii) poor contract enforcement, however, limits competition among buyers in the supply of infrequent payments; iii) in such a market, the effects of price increases on sales depend on both buyer credibility and payment frequency. Infrequent payments are common in many goods and labor markets, but they may not be competitively offered when contracts are not enforceable.
    Keywords: Saving Constraints; Commitment; Agricultural Markets; Contract Enforcement; Interlinked Transactions. JEL Classification: O12, O16, D90, Q13.
    Date: 2018

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