nep-agr New Economics Papers
on Agricultural Economics
Issue of 2019‒11‒11
eleven papers chosen by

  1. Does Agricultural Value Added Induce Environmental Degradation? Empirical Evidence from an Agrarian Country By Mary O. Agboola; Festus V. Bekun
  2. Quantifying Heterogeneous Returns to Genetic Selection: Evidence from Wisconsin Dairies By Jared P. Hutchins; Brent Hueth; Guilherme Rosa
  3. The Legal and Economic Case for an Auction Reserve Price in the EU Emissions Trading System By Carolyn Fischer; Leonie Reins; Dallas Burtraw; David Langlet; Åsa Löfgren; Michael Mehling; Stefan Weishaar; Lars Zetterberg; Harro van Asselt; Kati Kulovesi
  4. Carbon cost pass-through in industrial sectors By Neuhoff, K.; Ritz, R.
  5. Community financing in the German organic food sector: a key for sustainable food systems? By Gerlinde BEHRENDT; Sarah PETER; Simone STERLY; Anna Maria HÄRING
  6. The Rise and Persistence of Illegal Crops: Evidence from a Naive Policy Announcement By Mejía, D; Prem, M; Vargas, J. F
  7. Midwest Crop Farmers’ Perceptions of the U.S.-China Trade War By Shuyang Qu; Wendong Zhang; Minghao Li; Lulu Rodriguez; Guang Han; Erin Cork; James M Gbeda
  8. Engel's law in the commodity composition of exports By Sung-Gook Choi; Deok-Sun Lee
  9. An Initial Assessment of Biodiversity-Related Employment in South Africa By Amanda Driver; Fulufhelo Mukhadi; Emily A. Botts
  10. Biogas: a real option to reduce greenhouse gas emissions By Zhu, Tong; Curtis, John; Clancy, Matthew
  11. Speculation and the Informational Efficiency of Commodity Futures Markets By Martin Bohl; Alexander Pütz; Christoph Sulewski

  1. By: Mary O. Agboola (Riyadh, Saudi Arabia); Festus V. Bekun (Northern Cyprus, Turkey)
    Abstract: This study empirically investigates the agriculture-induced environmental Kuznets curve (EKC) hypothesis in an agrarian framework. Annual time series data from 1981–2014 was employed using Augmented Dickey–Fuller and the Phillips–Perron (PP) unit root test complemented by the Zivot and Andrews unit root test that accounts for a single structural break to ascertain stationarity properties of variables under consideration. For the cointegration analysis, an autoregressive distributive lag methodology and the recent novel Bayer and Hanck combined cointegration technique is employed. For the direction of causality, the Granger causality test is used as estimation technique. Empirical findings lend support for the long-run equilibrium relationship among the variables under consideration. This study also validates the inverted U-shaped pattern of EKC for the case of Nigeria, affirming that Nigeria remains at the scale-effect stage of its growth trajectory. Further empirical results show that foreign direct investment attraction helps mitigate carbon emissions in Nigeria. Based on these results, several policy prescriptions on the Nigerian energy mix and agricultural operations in response to quality of the environment were suggested for policymakers, stakeholders, and environmental economists that formulate and design environmental regulations and strategies to realise the Goal 7 of sustainable development goals (SDGs).
    Keywords: Agriculture ecosystem, Energy consumption, Granger Causality, EKC, Nigeria
    JEL: C32 Q1 Q4 Q5
    Date: 2019–01
  2. By: Jared P. Hutchins; Brent Hueth; Guilherme Rosa
    Abstract: Estimates of productivity growth in the dairy sector attribute as much as half of observed growth to genetic improvement. Unobserved match quality is an important determinate of genetic selection by dairy farmers that confounds attribution to genetic improvement alone. Using data from a large sample of Wisconsin dairy farms, and national-level data on sire rankings, we develop and estimate a model that accounts for selection behavior, and decompose total productivity change into separate effects for genetic improvement and endogenous selection. We find that selection accounts for as much as 75 percent of the total productivity improvement in our sample. Our results provide evidence for positive assortative matching, whereby farmers who adopt above-average yield genetics also perform better than average for their chosen genetics. Further, we find that management behavior accounts for a significant portion of within-herd cow-level heterogeneity, suggesting that dairy farmers manage their herds at the level of individual cows. Overall, our results indicate that a large portion of productivity growth in dairy farming can be explained by farmers’ ability to identify and select genetics well suited to their production environment.
    JEL: D22 D24 O3 O4 Q1 Q12 Q16
    Date: 2019–11
  3. By: Carolyn Fischer; Leonie Reins; Dallas Burtraw; David Langlet; Åsa Löfgren; Michael Mehling; Stefan Weishaar; Lars Zetterberg; Harro van Asselt; Kati Kulovesi
    Abstract: When it was launched in 2005, the European Union emissions trading system (EU ETS) was projected to have prices of around €30/ton CO2 and to be a cornerstone of the EU’s climate policy. The reality was a cascade of falling prices, a ballooning privately held emissions bank, and a decade of low prices providing inadequate incentive to drive investment in the technologies and innovation necessary to achieve long-term climate goals. The European Commission responded with administrative measures, including postponing the introduction of allowances (backloading) and using a quantity-based criterion for regulating future allowance sales (the market stability reserve); although prices are beginning to recover, it is far from clear whether these measures will adequately support the price into the future. In the meantime, governments have been turning away from carbon pricing and adopting overlapping regulatory measures that reinforce low prices and further undermine the confidence in market-based approaches to addressing climate change. The solution in other carbon markets has been the introduction of a reserve price that would set a minimum price in allowance auctions. Opponents of an auction reserve price in the EU ETS have expressed concern that a minimum auction price would interfere with economic operations in the market or would be tantamount to a tax, which would trigger a decision rule requiring unanimity among EU Member States. This Article reviews the economic and legal arguments for and against an auction reserve price. Our economic analysis concludes that an auction reserve price is necessary to accommodate overlapping policies and for the allowance market to operate efficiently. Our legal analysis concludes that an auction reserve price is not a “provision primarily of a fiscal nature,” nor would it “significantly affect a Member State’s choice between different energy sources.” We describe pathways through which a reserve price could be introduced.
    Keywords: emissions trading, auction reserve price, carbon tax, price floor, EU law
    JEL: Q54 Q58 K32 K34
    Date: 2019
  4. By: Neuhoff, K.; Ritz, R.
    Abstract: To achieve the ambitions of the 2015 Paris Climate Agreement, the decarbonization of energy-intensive industrial sectors is becoming increasingly important. This paper focuses on the economics of carbon cost pass-through: the change in product prices induced by carbon pricing. We provide a theoretical framework to understand pass-through at the sectoral level and a constructive review of the empirical evidence from the EU ETS and other jurisdictions. Our analysis is structured around three key drivers: international trade, market structure, and free allowance allocation. We provide a synthesis of our key findings for policymakers and identify gaps in the literature for future research.
    Keywords: Carbon pricing, cost pass-through, free allocation, full carbon price internalization, international trade, market structure
    JEL: L11 L70 Q54 Q58
    Date: 2019–10–31
  5. By: Gerlinde BEHRENDT (Eberswalde University for Sustainable Development, Germany); Sarah PETER (Institute for Rural Development Research at Goethe University Frankfurt/Main, Germany); Simone STERLY (Institute for Rural Development Research at Goethe University Frankfurt/Main, Germany); Anna Maria HÄRING (Eberswalde University for Sustainable Development, Germany)
    Abstract: The rise of socially responsible and impact investing funds provides evidence for an increased interest private investors have in combining their financial and ethical concerns. At the same time, citizens increasingly engage in food networks and take on a vital role in the governance of agri-food systems. These developments might benefit farms and firms which are committed to sustainable food and seek funding. Through different community financing models, they can involve citizens who aim at supporting the development of a more sustainable food system. While still a niche market, an increasing number of firms in the German organic food sector uses community financing to substitute or complement traditional bank credit financing. There is a wide range of different models which can be classified as follows: 1. Pure financing instruments, e.g. crowdfunding, profit participation rights, direct loans. 2. Financing models which base on a particular legal form, e.g. cooperative, corporation. 3. Financing in cooperation with an intermediary organization which pools citizens’ capital, e.g. citizen shareholder corporation, land purchase cooperative. 4. Others (mostly related to primary production), e.g. community supported agriculture (CSA), leasing and sponsorship. Community financing can increase financial independence from credit intuitions and provides an opportunity to receive funding which otherwise might be difficult to obtain. Given the high capital intensity in agriculture and rising purchase prices of agricultural land, access to traditional bank credit financing is a particular challenge for new or less productive farms. Access to finance can also be a key obstacle for smaller companies involved in collaborative short food chains and green start-ups that offer innovative products or services and/or lack business education. Apart from financial considerations, particular community financing models can also serve as marketing tool in order to build or intensify relationships to customers. As the example of the German energy transition shows, financial citizen participation can be crucial for financing the transformation of the energy sector. However, little is known about community financing models in the agri-food sector. Accordingly, this paper presents empirical evidence on community financing in the German organic food sector and discusses the role it can play in food system transformation.
    Keywords: Community financing; impact investing; food system transformation; crowdfunding; profit participation rights; cooperatives; citizen shareholder corporations
    JEL: Q14 P13 Q01 G23
    Date: 2019
  6. By: Mejía, D; Prem, M; Vargas, J. F
    Abstract: Well-intended policies often have negative unintended consequences if they fail to foresee the different ways in which individuals may respond to the new set of incentives. When widespread and persistent, these may lead to a net reduction of social welfare. Focusing on the case of anti-drug policies, in this paper we show that the recent unprecedented surge in the growing of illicit coca crops in Colombia was the result of a naive and untimely policy announcement during peace negotiations between the government and the FARC guerrillas. On May 2014, the parties peace delegations issued a press release announcing that coca-growing farmers would receive material incentives for voluntary crop substitution once a final agreement had been reached. To evaluate the anticipation effect of this announcement we exploit the cross sectional variation on both the cost advantage of growing coca (using an ecological measure of coca suitability) and the expected benefits of doing so (using a predicted measure of where the material benefits would have been targeted). Coca plantations levels remained high even after the implementation of the announced incentives scheme. We explain this persistence by documenting that the surge in coca growing is differentially higher in areas with presence illegal armed groups, that benefited financially from availability of a key input in the drug trade.
    Keywords: Coca growing, Drug war, Anticipation effects, Policy announcement, Colombia
    JEL: K42 D78
    Date: 2019–10–09
  7. By: Shuyang Qu; Wendong Zhang (Center for Agricultural and Rural Development (CARD)); Minghao Li; Lulu Rodriguez; Guang Han; Erin Cork; James M Gbeda
    Abstract: We provide the first micro-level analysis of farmers’ perceptions and views of the U.S.-China trade war. We asked farmers in Minnesota, Iowa, and Illinois with at least 250 operating acres of corn or soybeans from February to April 2019. Our results show that despite the immediate negative economic impacts they have experienced, over 56% were still somewhat (38%) or strongly supportive (22%) of President Trump’s tariffs on Chinese products. This relates, in part, to the 2018 Market Facilitation Program payments that a vast majority of farmers (86%) find at least somewhat useful. We find that in general, our farmer-respondents largely view the trade disruption as a short-term-pain/long-term-gain phenomenon. At the same time, a vast majority (76%) recognize that American farmers will bear the brunt of the tariffs imposed by China, and 62% agree that U.S. agriculture is likely to lose markets. In addition, a majority of our sample harbor five "pain points" related to China: poor intellectual property protection, the trade deficit, the U.S. Treasury debt it holds, cyber-economic espionage, and job losses to China. Finally, Fox News, farm bureaus, and Successful Farming magazine were the most frequently cited information sources by farmers.
    Date: 2019–10
  8. By: Sung-Gook Choi; Deok-Sun Lee
    Abstract: Different shares of distinct commodity sectors in production, trade, and consumption illustrate how resources and capital are allocated and invested. Economic progress has been claimed to change the share distribution in a universal manner as exemplified by the Engel's law for the household expenditure and the shift from primary to manufacturing and service sector in the three sector model. Searching for large-scale quantitative evidence of such correlation, we analyze the gross-domestic product (GDP) and international trade data based on the standard international trade classification (SITC) in the period 1962 to 2000. Three categories, among ten in the SITC, are found to have their export shares significantly correlated with the GDP over countries and time; The machinery category has positive and food and crude materials have negative correlations. The export shares of commodity categories of a country are related to its GDP by a power-law with the exponents characterizing the GDP-elasticity of their export shares. The distance between two countries in terms of their export portfolios is measured to identify several clusters of countries sharing similar portfolios in 1962 and 2000. We show that the countries whose GDP is increased significantly in the period are likely to transit to the clusters displaying large share of the machinery category.
    Date: 2019–11
  9. By: Amanda Driver; Fulufhelo Mukhadi; Emily A. Botts (South African National Biodiversity Institute (SANBI); Senior Biodiversity Policy Advisor)
    Abstract: In the context of high and persistent unemployment in South Africa, this paper explores the extent to which the country’s biodiversity assets, which are exceptional in global terms, contribute to providing jobs. A conceptual framework for defining biodiversity-related employment is presented. Using a methodology that draws on a combination of three different data sources (administrative data, national survey data, and existing estimates for particular biodiversity-related sectors or sub-sectors), an initial estimate was developed of 388 000 direct jobs related to biodiversity in 2014, representing 2.5% of national employment. The estimate was subsequently updated to 418 000 biodiversity-related jobs in 2017, representing 2.6% of national employment. Of these 418 000 jobs, 17% (72 000) were jobs involved in conserving biodiversity, and 83% (346 000) were jobs that depend on using biodiversity, including both non-consumptive and extractive use. The number of jobs that depend on using biodiversity is likely to be an underestimate, as data was available only for some biodiversity-related sectors or sub-sectors. An important finding is that for every job dedicated to conserving or managing South Africa’s biodiversity assets and ecological infrastructure, approximately five jobs depend on utilising biodiversity. The implication is that current efforts to conserve and manage biodiversity should be seen not simply as an end in themselves or a cost to the economy but as an investment in a resource that supports wider economic activity and employment. The results suggest strong potential for biodiversity assets to support long-term inclusive growth and employment outside major urban centres, with further work needed to quantify this potential and to determine how best it can be enabled. This paper was developed as part of the REDI 3x3 Research Project on Employment, Income Distribution and Inclusive Growth, within Focus Area 3 on Inclusive Growth. The research was undertaken by the South African National Biodiversity Institute (SANBI) with guidance from the Development Policy Research Unit (DPRU).
    Keywords: Biodiversity, Employment, unemployment, jobs, South Africa
    Date: 2019–10
  10. By: Zhu, Tong; Curtis, John; Clancy, Matthew
    Date: 2019
  11. By: Martin Bohl; Alexander Pütz; Christoph Sulewski
    Abstract: The recent financialization in commodity futures markets has prompted many calls for restricting speculative activity due to its diametrical effect on market quality. One aspect of market quality is that new information is instantanously reflected in the price. This article studies how speculative activity affects informational efficiency of commodity futures markets. We document significant temporal and cross-sectional variation in market efficiency in 20 commodity futures markets based on a sample of weekly closing prices from 1986 to 2019. The fixed effects panel regression finds no evidence for a significant relation between speculative activity and the degree of informational efficiency after controlling for volatility and liqudity. The results are robust across different window sizes, sampling frequencies and levels of trader aggregation.
    Keywords: Market efficiency, Variance ratio test, Commodity futures
    JEL: G14 G15 C12
    Date: 2019–10

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