This paper studies the evolving distribution of prices in a vertical sector in the presence of market cycles. It investigates the dynamic linkages between farm and retail prices with an application to the Chinese pork sector. The econometric approach relies on a quantile autoregressive (QAR) model that provides a flexible representation of the dynamics of price volatility. It investigates the presence and nature of price cycles and their implications for price transmission. We document that the marketing margin is more sensitive to changes in consumer income than in feed cost. In addition, rising feed cost increases the amplitude of the cycle while higher consumer income increases the period of the cycle.
External cost from meat consumption raises an issue of possible government mechanisms toward mitigation. Economic theory provides a framework for determining the optimal set of mechanisms considering the associated benefits and costs. Such a theoretical development rests on consumers' responsiveness to alternative mechanisms. Considering two mechanisms, a Pigouvian tax and green-label education, yields tandem theoretical optimal government mechanisms. Populating this theoretical model with empirically derived elasticities and other parameters provides an application. Results indicate education alone will likely not yield a high social-optimal level of mitigation. Instead, if external costs warrant government mechanisms, a Pigouvian tax will be required to move consumption toward a socially optimal state.
This article opens the black box of total factor productivity by decomposing this "all-in-one" index into various input-embedded and input-free productivities in a new growth accounting framework. The new method identifies different channels through which growth drivers affect economic growth and finds the most effective way to boost the economy, which is unidentified in standard method. This new approach uses a varying coefficient stochastic frontier model, which integrates the standpoints of the endogenous growth theory and the induced innovation theory into a reduced-form productivity analysis. The new growth accounting is then applied to study the impacts and contributions of R&D investments, international trade, and structural transformation to world agricultural growth during the period of 1962 to 2014. The empirical results provide new evidence to support the endogenous growth theory and the induced innovation theory, indicating the necessity of using the new growth accounting method.
Agricultural production is substantially affected by the variations in global weather patterns, particularly by the El Nino-Southern Oscillation (ENSO). Thus, incorporating the forecast of imminent ENSO phases can enhance the effectiveness of crop insurance and mitigate the adverse impacts of weather on agriculture. Given the probabilistic nature of the ENSO phase forecast, we employ a Bayesian framework to estimate the value of ENSO information on various aspects of crop insurance. Our results indicate potential benefits of ENSO forecast to insurance rate setting and policy selection. At the same time, we caution against overoptimism in this assessment as economic benefits may diminish as the accuracy of ENSO forecast decreases. Simulations and numerical experiments demonstrate the practical usefulness of the proposed method for various stakeholders of the US crop insurance industry. Implications to various crop insurance policies are also discussed.
We conduct a randomized controlled trial to examine the impacts of delayed premium payment on insurance uptake and the subsequent investment decisions among smallholder farmers in rural China. Our results show uptake among those with the delayed payment option is 10% higher than and three times as high as among those without the option. We also find a positive impact of delayed premium payment and insurance adoption on household investment in production, especially higher risk activities.
American Indian reservations have low incomes and high rates of poverty relative to adjacent communities, and the income gap appears to be even larger for Indian farmers. We examine the extent to which a lack of access to capital might explain these differences using irrigation systems as a proxy for on-farm investment around the Uintah-Ouray Indian Reservation in eastern Utah. Uintah land is held in trust by the US government, and farmers on this land face significant barriers to acquiring capital to invest in irrigation equipment and infrastructure. We use the boundaries from a 1905 land allotment as a natural experiment, employing both sharp and fuzzy regression discontinuity designs to explore whether agricultural land use, irrigation levels, irrigation investment, and crop choice differ across the boundary. The original allocation provided similar land in the immediate neighborhood around its borders, and our results suggest that today tribal trust land is farmed and irrigated at rates similar to adjacent land. However, conditional on being irrigated, tribal trust land is around thirty-two percentage points less likely to utilize capital-intensive sprinkler irrigation, and up to ten percentage points less likely to grow high-value crops. Trust ownership, which is characterized by cumbersome bureaucratic processes, limits on agricultural lease flexibility, and the inability to use land as collateral to acquire loans, is a likely explanation for the observed differences.
With the turn of the century, Australian agricultural productivity growth slowed dramatically. We investigate the connection between this slowdown and climatic factors by comparing regional-level growth patterns before and after the advent of the Australian Millennium Droughts. The analysis incorporates climatic variates directly into the productivity accounting framework to reflect the stochastic nature of agricultural production, and measured productivity growth is decomposed into four components: technological change, weather-related change, input-scale adjustment, and diffusion (adaptation). Nonparametric productivity measurement and statistical techniques are used to quantify and examine the patterns of the observed productivity slowdown. The analysis suggests that the primary determinant of the slowdown is not a slowdown in technological innovation but climatic-related changes in the pattern and rate of diffusion of technological advances.
We investigate the food retailing landscape and the exit of independent grocery stores in rural America using U.S. NETS data. Our paper makes several contributions that could potentially help the agenda for future research and public policy. We begin by documenting local concentration trends in food retailing and how they change across rural and urban markets from 1990 to 2015. Then, we conduct two event studies to examine how entry by a large chain is associated with the local market concentration and independent grocery retailer (IGR) exits. Last, we document the IGR exit rate in rural markets for a period of twenty-five years and investigate its determinants in a regression framework. Our results show that market concentration in food retailing has increased since 1990, but the increasing trend after the Great Recession of 2008 is particularly noticeable. The local concentration differs substantially by the urban status of markets. Focusing on rural markets, we show that entry by a large food retailer is associated with higher market concentration and the decreasing number of IGRs. We also find that the annual average IGR exit rate is around 6.6% during the study period. The IGRs that are younger that operate in relatively more competitive markets, and that face entry by a large chain, are more likely to exit. Also, IGR rates are higher in markets with lower median income and higher poverty rates. We discuss how our results can potentially inform policies on sustainable rural development, food access, and food insecurity in rural communities.
This article develops an economic model to analyze how the risk of water shortages affects farmers' land irrigation decision and how the priority-based water sharing arrangement redistributes such a risk among farms with different water rights priorities. The analysis brings together an array of comprehensive data files on irrigation rights, water supplies, and agricultural land use from eastern Idaho. Results indicate that a more left-skewed distribution of streamflow significantly discourages land irrigation among farmers except the most senior rights holders. The priority-based water sharing arrangement redistributes the macroscale risk of water shortages and thus exposes farmers of different water rights priorities to heterogeneous levels of risk: senior water rights holders are affected the least and such a risk is instead passed mostly on to junior water rights holders. The role of water rights in risk redistribution is more significant when the probability distribution of water shortage risk is asymmetric rather than symmetric. The historical development pattern of water rights influences how the priority of water rights takes effect on land irrigation decision.
The relationship between farm size and productivity has long been a topic of debate in development economics. Using farm-level panel data from 2003 to 2013, we investigate the relationship between maize yield and farm size in Northern China. After controlling for farm-specific characteristics, we restore a mild U-shaped relationship between maize yield and cropping area from the apparent inverse U-shaped curve. This suggests that an inverse farm size-productivity relationship persists for most small-sized farms. Further analyses demonstrate that farmer input choice between labor and capital is likely to smooth the non-linear farm size-productivity relationship, with capital use being more likely to affect the farm size-productivity relationship at a larger scale. The findings imply that subsidizing farmers to rent land without helping them become better-equipped could result in resource misallocation towards larger farms using less-efficient labor-intensive technologies.
Using data from the Living Standards Measurement Study in Malawi, we examine the spillover effects of tobacco farms on children's labor supply, education, and health. To address potential endogeneity, the share of tobacco farms in a community is instrumented by the change in tobacco buyers following termination of the intermediate buyer system. We find that, as tobacco cultivation is labor-intensive, children in communities with more tobacco growers spend more time as casual laborers and are less likely to advance to the next grade. Adverse health effects, measured by the likelihood of suffering from illnesses related to green tobacco sickness, are estimated to be larger than previously documented. This affects not only "working-age" children but also children too young to work on tobacco farms. Moreover, exposure to large-scale tobacco cultivation is estimated to reduce the height-for-age z-score of children aged 6-60 months. These findings highlight the importance of raising awareness and taking measures to protect children against green tobacco.
The decline of European honey bees (Apis mellifera) has been a prominent part of supporting pollinator conservation among the public and conservation efforts, even while honey bees are not native to North America and may compete for resources with native insect pollinators. However, little is known about what distinguishes support for native insect pollinators, including solitary bees, the majority of native bees, which provides use and non-use values distinct from honey bees even though some natives have faced even more precipitous die-offs. Using data collected from the general public and beekeepers in Louisiana, we adopt a contingent valuation method to investigate the value of conserving solitary bees. Results suggest modest to moderate positive willingness to pay for solitary bee conservation, and possibly higher willingness to pay among honey beekeepers versus the general public. Significant heterogeneity exists between the general public and beekeepers in terms of their knowledge and attitudes of honey bees and other pollinators.
Collective labels are widespread in food markets, and are either separated or nested with private brands-the latter are known as "nested names". We propose a model to explain the rationale of nested names, with collective labels being effective in reaching unaware consumers, while individual brands help firms to reach aware consumers. We also incorporate decision-making within the group of producers joining collective labels, taking into account their heterogeneity in providing quality. We show that nested names emerge when consumers become more aware of information on the label's quality, as well as when producers become more heterogeneous. Welfare may decrease, however, when the group switches to nested names because they may lead to lower quality incentives for the majority of producers. Our results also provide insights into the historical and recent trends in food industries, such as within-label differentiation and label fragmentation, as well as their respective welfare implications.
We examine the role of teachers in explaining the urban-rural gap in educational outcomes. Using a large panel data set of students and teachers collected from China and explicitly controlling for the endogeneity of prior student academic achievement, we find that the urban-rural difference in teacher effects contributes in large part to the observed urban-rural gap in student academic achievement. In other words, if rural teachers were of the same quality as urban teachers, the urban-rural gap in student academic achievement would be reduced substantially.
The presence of hypothetical bias (HB) associated with stated preference methods has garnered frequent attention in the broad literature trying to describe and understand human behavior, often seen in environmental valuation, marketing studies, transportation choices, medical research, and others. This study presents an updated meta-analysis to explore the source of HB and methods to mitigate it. While previous meta-analysis on this topic often involves a few dozen articles, this analysis includes 131 studies after reviewing over 500 published and unpublished articles. This enables the inclusion of several important factors that have not been investigated before. These include relatively recent willingness to pay elicitation methods such as choice experiments and the Turnbull lower bound estimator. Newly emerged HB reduction techniques such as consequentiality and certainty follow-up treatments are also included. For explanatory variables that have been examined in previous studies, this analysis does not always report consistent findings. In particular, holding everything constant and contrary to commonly-held beliefs, the method of auction does not offer much reduction to HB compared to more conventional methods such as a referendum vote. However, choice experiment, cheap talk, consequentiality and certainty follow-up all significantly contributed to explaining and mitigating the magnitude of HB. These results help practitioners to understand HB's presence and choose appropriate methods for amelioration. The framework established through this study also enables future analyses targeted at understanding variations built upon one or multiple HB mitigation techniques.