Recent are_arewp items

Testing the Adding Up Condition in Demand Systems

Wed, 4 Jun 2014 00:00:00 +0000

Testing the Adding Up Condition in Demand Systems

CGIAR Reform - Why So Difficult? Review, Reform, Renewal, Restructuring, Reform Again and then "The New CGIAR" - So Much Talk and So Little Basic Structural Change - Why?

Wed, 21 May 2014 00:00:00 +0000

This paper reviews 40 years of tortured history of the Consultative Group on International Agricultural Research's (CGIAR) attempts at structural reform. Yet the basic structure of independent centers created in the 1960's and 70's remains in place despite repeated attempts to restructure the basic building blocks of the system. Instead successive layers of super structure: eco-regional programs; Challenge programs; CGIAR Research Programs (CRP's); and finally a Consortium with another Board and CEO have been added to foster inter-center and interdisciplinary research. The failure of reforms is attributed to the unwillingness of donors, and the World Bank leadership of the CGIAR, to take on entrenched center interests. Some success in modest reform has occurred at the sub-system/center level but only with much difficulty. The paper concludes with some suggestions as to how reform might be fostered.

Quantity Versus Shares in Estimating Demand Systems

Thu, 12 Jul 2012 00:00:00 +0000

This paper considers the estimation and testing of demand systems when the number of sample goods is smaller than the number of commodity choices available to consumers. In this case, the demand system is incomplete. The large majority of papers that appeared in the literature specifies and estimates a demand system in share format even when the system may be incomplete. The criterion for deciding whether a share format is admissible without loss of information is a test of the adding-up condition. This test, however, requires the estimation of a demand system in quantity format.

The Dual of the Maximum Likelihood Method

Thu, 31 May 2012 00:00:00 +0000

The Maximum Likelihood method estimates the parameter values of a statistical model that maximize the corresponding likelihood function, given the sample information. This is the primal approach that, in this paper, is presented as a mathematical programming specification whose solution requires the formulation of a Lagrange problem. A remarkable result of this setup is that the Lagrange multipliers associated with the linear statistical model (regarded as a set of constraints) is equal to the vector of residuals scaled by the variance of those residuals. The novel contribution of this paper consists in developing the dual model of the Maximum Likelihood method under normality assumptions. This model minimizes a function of the variance of the error terms subject to orthogonality conditions between the errors and the space of explanatory variables. An intuitive interpretation of the dual problem appeals to basic elements of information theory and establishes that the dual maximizes...

The Dual of the Least-Squares Method

Tue, 13 Mar 2012 00:00:00 +0000

The least-squares method was firmly established as a scientific approach by Gauss, Legendre and Laplace within the space of a decade, at the beginning of the nineteenth century. Legendre was the first author to name the approach, in 1805, as "méthode des moindres carrés," a "least-squares method." Gauss, however, is credited to have used it as early as 1795, when he was 18 years old. He, subsequently, adopted it in 1801 to calculate the orbit of the newly discovered planet Ceres. Gauss published his way of looking at the least-squares approach in 1809 and gave several hints that the least-squares algorithm was a minimum variance linear estimator and that it was derivable from maximum likelihood considerations. Laplace wrote a very substantial chapter about the method in his fundamental treatise on probability theory published in 1812. Surprisingly, there still remains an unexplored aspect of the least-squares method: since the traditional formulation is stated as minimizing...

Primal-Dual Estimation of a Linear Expenditure Demand System

Thu, 16 Sep 2010 00:00:00 +0000

Efficient estimates require the utilization of all the available theoretical and statistical information. This fact suggests that econometric models based on an explicit optimization theory might achieve more efficient estimates when all the primal and dual relations are used for a joint estimation of the model’s parameters. We present a discussion of this idea using a Linear Expenditure System (LES) of consumer demand. We assume that the risk-neutral household chooses its consumption plan on the basis of expected information. Some time after that decision, the econometrician attempts to measure quantities and prices and in so doing commits measurement errors. Hence, the econometric model is an errors-in-variables nonlinear system of equations for which there is no known consistent estimator. We propose an easy-to-implement estimator and analyze its empirical properties by a Monte Carlo simulation that shows a relatively small bias.

Efficient Estimates of a Model of Production and Cost

Thu, 16 Sep 2010 00:00:00 +0000

In 1944, Marschak and Andrews published a seminal paper on how to obtain consistent estimates of a production technology. The original formulation of the econometric model regarded the joint estimation of the production function together with the first-order nec- essary conditions for profit-maximizing behavior. In the seventies, with the advent of du- ality theory, the preference seemed to have shifted to a dual approach. Recently, how- ever, Mundlak resurrected the primal-versus-dual debate with a provocative paper titled “Production Function Estimation: Reviving the Primal.” In that paper, the author asserts that the dual estimator, unlike the primal approach, is not efficient because it fails to util- ize all the available information. In this paper we argue that efficient estimates of the production technology can be obtained only by jointly estimating all the relevant primal and dual relations. Thus, the primal approach of Mundlak and the dual approach of McElroy become...

Estimation of Consumer Demand Functions When the Observed Prices Are the Same for All Sample Units

Thu, 16 Sep 2010 00:00:00 +0000

With the advent of the almost ideal demand system (AIDS) of Deaton and Muellbauer, the estimation of consumer demand functions revolves around specifications that use flexible functional forms of the indirect utility function. This dual approach has put on the backburner the traditional primal approach because the direct utility function exists only in a latent state. The lack of explicit, analytical invertibility of either system, however, is an indication that focusing exclusively on the dual side of the consumer problem is equivalent to disregard potentially important and independent information residing with the primal side. This paper suggests that efficient estimates (in the sense of using all the available information) of the demand functions require the joint estimation of all the primal and dual relations. The specification of this objective assumes that risk- neutral households maximize their expected utility subject to their expected budget constraint. This theoretical...

A Dual Approach to Estimation With Constant Prices

Thu, 16 Sep 2010 00:00:00 +0000

In a recent paper, Mundlak assumes that the price-taking, risk-neutral and profit- maximizing entrepreneur makes his decisions on the basis of a planning model that maximizes expected profit using expected prices. In the same paper, the author asserts that when there is no sample price variation across competitive firms, it is impossible to estimate the supply and factor demand functions from cross-section data using a dual approach. In a famous paper, titled “To Dual or not to Dual,” Pope asserted a similar opinion. This paper shows that, using Mundlak’s assumption about planning decisions based upon expected profit, it is possible to use a dual estimator to estimate supply and factor demand functions. This objective is achieved by using Mundlak’s assumption about the individuality of the firm’s expectation process. A two-phase procedure is suggested to obtain consistent estimates of the expected quantities and prices which are then used, in phase II, in a nonlinear seemingly...

A Nonlinear Generalized Additive Error Model of Production and Cost

Thu, 16 Sep 2010 00:00:00 +0000

In 1944, Marschak and Andrews published a seminal paper on how to obtain consistent estimates of a production technology. The original formulation of the econometric model regarded the joint estimation of the production function together with the first-order necessary conditions for profit-maximizing behavior. In the seventies, with the advent of econometric duality, the preference seemed to have shifted to a dual approach. Recently, however, Mundlak resurrected the primal-versus-dual debate with a provocative paper titled “Production Function Estimation: Reviving the Primal.” In that paper, the author asserts that the dual estimator, unlike the primal approach, is not efficient because it fails to utilize all the available information. In this paper we demonstrate that efficient estimates of the production technology can be obtained only by jointly estimating all the relevant primal and dual relations. Thus, the primal approach of Mundlak and the dual approach of McElroy become...

Farmers' Subjective Valuation of Subsistence Crops: The Case of Traditional Maize in Mexico

Thu, 13 Nov 2008 00:00:00 +0000

Shadow prices guide farmers' resource allocations, but for subsistence farmers growing traditional crops, shadow prices may bear little relationship with market prices. We econometrically estimate shadow prices of maize using data from a nationally representative survey of rural households in Mexico. Shadow prices are significantly higher than the market price for traditional but not improved maize varieties. They are particularly high in the indigenous areas of southern and southeastern Mexico, indicating large de facto incentives to maintain traditional maize there.

Estimation of Supply and Demand Elasticities of California Commodities

Wed, 2 Jul 2008 00:00:00 +0000

The primary purpose of this paper is to provide updated estimates of domestic own-price, cross-price and income elasticities of demand and estimated price elasticities of supply for various California commodities. Flexible functional forms including the Box-Cox specification and the nonlinear almost ideal demand system are estimated and bootstrap standard errors obtained. Partial adjustment models are used to model the supply side. These models provide good approximations in which to obtain elasticity estimates. The six commodities selected represent some of the highest valued crops in California. The commodities are: almonds, walnuts, alfalfa, cotton, rice, and tomatoes (fresh and processed). All of the estimated own-price demand elasticities are inelastic and, in general, the income elasticities are all less than one. On the supply side, all the short-run price elasticities are inelastic. The long-run price elasticities are all greater than their short-run counterparts....

FAO in the Changing Global Landscape

Tue, 12 Feb 2008 00:00:00 +0000

FAO in the Changing Global Landscape

FAO, Research and the CGIAR

Tue, 12 Feb 2008 00:00:00 +0000

FAO, Research and the CGIAR

Direct Elicitation of Credit Constraints: Conceptual and Practical Issues with an Empirical Application to Peruvian Agriculture

Tue, 15 Jan 2008 00:00:00 +0000

This paper provides a methodological bridge leading from the well-developed theory of credit rationing to the less developed territory of empirically identifying credit constraints. We begin by developing a simple model showing that credit constraints may take three forms: quantity rationing, transaction cost rationing, and risk rationing. Each form of non-price rationing adversely affects household resource allocation and thus should be accounted for in empirical analyses of credit market performance. We then outline a survey strategy to directly classify households as credit unconstrained or constrained and, if constrained, to further identify which of the three non-price rationing mechanisms is at play. We discuss several practical issues that arise due to the use of a combination of “factual” and “interpretative” survey questions. Finally, using a data set from northern Peru, we demonstrate the importance of accounting for all three forms of credit constraints by estimating...

Credit Constraints and Productivity in Peruvian Agriculture

Tue, 15 Jan 2008 00:00:00 +0000

Credit Constraints and Productivity in Peruvian Agriculture

Underwriting Area-based Yield Insurance to Crowd-in Credit Supply and Demand

Thu, 29 Nov 2007 00:00:00 +0000

Recent theoretical and empirical evidence suggests that risk (especially covariant risk that is correlated across producers) may discourage both the supply of agricultural credit and the willingness of small holders to utilize available credit and enjoy the higher expected incomes credit could make available to them. One possible resolution to this problem is to remove risk from the system by independently insuring it. However, conventional (all hazard) crop insurance has in almost every instance been rendered financially unsustainable by moral hazard and adverse selection problems. This paper instead analyzes two index-based insurance schemes, one based on a weather index, and a second based on measured average yields. While these index insurance products do not protect the farmer from all risks, our econometric analysis (which is based on data from the north coast of Peru) shows that they could have substantial value to the producer and could also crowd-in credit supply from...

Valuing the Numismatic Legacy of Alexander the Great

Sun, 1 Jul 2007 00:00:00 +0000

The conquests of Alexander III ("The Great") transformed the economic as well as political landscape of ancient Greece and Persia. It produced a prolific coinage, part of which survives today. This paper uses a hedonic price modeling approach to analyze auction prices of the major coin type of Alexander the Great. The findings make it possible to identify the effects of specific coin characteristics on realized auction prices, sellers' reservation prices (auction price estimates), discrepancies between realized and estimated prices, and the variability of auction prices around predicted prices, or auction price surprise. The findings reveal that similar considerations shape estimated and realized prices, but bidders consistently value positive coin characteristics more highly than do sellers. Realized auction prices, the difference between realized and estimated prices, and auction price surprise are increasing over time, particularly for the highest grade coins.

Does Natural Resource Extraction Mitigate Poverty and Inequality? Evidence from Rural Mexico and a Lacandona Rainforest Community

Tue, 27 Feb 2007 00:00:00 +0000

The potential importance of natural reosurces for the livelihood of poor rural households has long been recognized but seldom quantified and analyzed. In this paper we apply poverty and inequality measures to national and community level data sets to explore the impacts of resource extraction on rural welfare. Our findings suggest that natural resource extraction reduces both income inequality and poverty. Results from a simulation analysis at the community level indicate that poverty may be reduced, in the short-run, by increases in the price of a non-timber forest product.

Does Agricultural Liberalization Reduce Rural Welfare in Less Developed Countries? The Case of CAFTA

Thu, 1 Feb 2007 00:00:00 +0000

Conventional economic wisdom and findings from aggregate economy-wide models suggest that removing tariffs on agricultural imports is detrimental to rural welfare in less developed countries. This paper explores the rural welfare effects of own-country agricultural liberalization under CAFTA using a disaggregated rural economy-wide model that nests within it a series of micro agricultural household models. Our simulation findings suggest that CAFTA would reduce nominal incomes for nearly all rural household groups in El Salvador, Guatemala, Honduras and Nicaragua. However, compensating variations that take into account rural economy-wide adjustments to policy shocks are mostly negative, implying that current agricultural protection policies are disadvantageous for most rural household groups.

Migration and Income Diversification Evidence from Burkina Faso

Thu, 1 Feb 2007 00:00:00 +0000

This paper uses limited-dependent variable methods and new data from Burkina Faso to test the impact of inter-continental and continental migration on activity choice and incomes in rural households. Econometric evidence supports our theoretical expectation that the impact of emigration varies both by migrant destination and production activity. We find no evidence of either positive or negative effects of continental migration on agricultural or livestock activities, and only a small negative impact on non-farm activities. However, inter-continental migration, which tends to be long term and generates significantly larger remittances, stimulates livestock production while being negatively associated with both staple and non-farm activities.

Migration and the Sending Economy: A Disaggregated Rural Economy Wide Analysis

Thu, 1 Feb 2007 00:00:00 +0000

Most economic research on migration impacts in source economies focuses on the households that send migrants and receive remittances, ignoring linkages that transmit migration's influences to others in local and regional economies. This paper offers an alternative, disaggregated economy wide perspective on migration and its impacts. It presents and illustrates a methodology to understand not only migration's effects on migrant-sending households, but also the ways in which these households transmit influences of migration to others in the source economy, via local market linkages. Data from the 2003 Mexico National Rural Household Survey are used to calibrate a series of interacting rural household models nested within a general equilibrium model of the whole rural economy. This modeling approach combines the strengths of micro models focusing on rural households with economy wide models, which highlight economic linkages among economic actors but traditionally have been...

Ecotourism and Economic Growth in the Galapagos: An Island Economy-wide Analysis

Wed, 11 Oct 2006 00:00:00 +0000

This paper raises questions about the compatibility of "ecotourism" and conservation in the unique environment of the Galapagos Islands. It updates a 1999 economy-wide analysis that predicted that increases in tourism would result in rapid economic as well as demographic growth on the islands. The following six years witnessed sharp growth in tourism; a restructuring of tourism around larger cruise ships and new, larger hotels; and rapid population growth. Our findings indicate that total income (that is, the gross domestic product) of the Galapagos increased by an estimated 78% between 1999 and 2005, placing Galapagos among the fastest growing economies in the world. Tourism continues to be far and away the major driver of economic growth; however, new injections of all sorts of spending, including by government, commercial fishing, and conservation agencies, have had a multiplier effect on income in the Galapagos economy, and as a result, on population growth, via uncontrolled...

Risk Rationing and Wealth Effects in Credit Markets

Tue, 21 Mar 2006 00:00:00 +0000

By shrinking the available menu of loan contracts, asymmetric information can result in two types of nonprice rationing in credit markets. The first is conventional quantity rationing. The second is 'risk rationing.' Risk rationed agents are able to borrow, but only under relatively high collateral contracts that offer them lower expected well-being than a safe, reservation rental activity. Like quantity rationed agents, credit markets do not perform well for the risk rationed. While the incidence of conventional quantity rationing is straightforward (low wealth agents who cannot meet minimum endogenous collateral requirements are quantity rationed), the incidence of risk rationing is less straightforward. Increases in financial wealth, holding productive wealth constant, counter intuitively result in the poor becoming entrepreneurs and the wealthy becoming workers. While this counterintuitive puzzle has been found in the literature on wealth effects in principal-agent...

Non-pecuniary Value of Employment and Natural Resource Extinction

Tue, 14 Feb 2006 00:00:00 +0000

We assume that people value employment not only to earn icome to satisfy their consumption needs but also as a means of community/social involvement that provides socio-psychological (non-pecuniary) benefits. We show that the latter incentive can encourage full employment harvesting resources and explain why poor resource-based communities may exhaust a natural resource in a finite time even if there is a sustainable path of resource consumption available. We show that communtities could sustain their natural resources by using outside-the-community employment and economic diversification, but, to be effective, such policies must ensure that the outside wage rate and the initial capital stock are above certain minimum levels, which will be higher the longer these policies are delayed.

Non-pecuniary Work Incentive and Labor Supply

Tue, 14 Feb 2006 00:00:00 +0000

Recognizing that people value employment not only to earn income to satisfy their consumption needs, but also as a means to gain socio-psychological (nonpecuniary) benefits, we show that once nonpecuniary work incentives are incorporated into standard labor supply theory, (i) the wage rate under-estimates (over-estimates) the true value of nonwork/leisure time when work has nonpecuniary benefits (costs), (ii) nonpecuniary benefits can be a substitute for monetary wages as work incentives,(iii) at very low wage rates, work can become a net wource of utiltiy, and (iv) the shape of labor supply curve differs from standard theory. We also indentify conditions under which a greater nonpecuniary work incentive generates a larger individual labor supply, and examine the effects of non-wage income on labor supply both for paid and voluntary work.

Pollicy Reforms and the Gender Dynamics of Rural Mexico-to-U.S. Migration

Tue, 29 Nov 2005 00:00:00 +0000

The supply of immigrant workers from Mexico is critical to both agricultural and non-agricultural sectors in the United States. Approximately one half of all Mexican immigrants are females who typically are employed in positions that have minimal legal status requirements, e.g., domestic services and clerical and agricultural jobs. In the past two decades, the United States implemented policy reforms motivated in large part by the desire to curtail Mexico-to-U.S. migration. Despite the large female share and differences in the sector of employment of female and male Mexican immigrants, there has been no effort, to our knowledge, to formally test for gender and employment sector differences in the impact of policy shocks on migrant flows. This paper utilizes data from the 2003 Mexico National Rural Household Survey to econometrically test the effects of U.S. immigration and trade reforms on the gender and employment sector-dsstination of rural Mexico-to-U.S. migrants. Findings...

Impacts of Policy Reforms on the Supply of Mexican Labor to U.S. Farms: New Evidence from Mexico

Mon, 28 Nov 2005 00:00:00 +0000

The availability of immigrant farm-workers from Mexico is a critical factor affecting the fresh fruit and vegetable sector in the United States. This paper uses a retrospective panel data set from rural Mexico to examine the impact of the North American Free Trade Agreement and the Immigration Reform and Control Act on the supply of migrant labor to the United States. We find that, in contrast to policy expectations, both policies were associated with an increase in migration to U.S. farm jobs from rural Mexico.

A Gain with a Drain? Evidence from Rural Mexico on the New Economics of the Brain Drain

Wed, 16 Nov 2005 00:00:00 +0000

Evidence is presented in support of the "brain gain" view that the likelihood of migrating to a destination wherein the returns to human capital (schooling) are high creates incentives to acquire human capital in migrant-sending areas. In Mexico, even though internal migrants are more educated than those who stay behind, the average level of schooling in the migrant-sending villages increases with internal migration. This finding is consistent with the hypothesis that the dynamic investment effects reverse the static, depletion effects of migration on schooling. Households' access to high-skill internal migration networks significantly increases the likelihood that children will attend school beyond the compulsory level. Access to low-skill internal networks has the opposite effect. By contrast with internal migration, migration from rural Mexico to the U.S. does not select positively on schooling, nor does it significantly influence human capital formation, even though...

Subsistence Response to Market Shocks

Wed, 16 Nov 2005 00:00:00 +0000

Micro-economic models posit that transaction costs isolate subsistence producers from output market shocks. We integrate microeconomic models of many heterogeneous households into a general-equilibrium model and show that supply on subsistence farms may respond, in apparently perverse ways, to changes in output market prices. Price shocks in markets for staple goods are transmitted to subsistence producers through interactions in factor markets. In the case presented, a decrease in the market price of maize reduces wages and land rents, stimulating maize production by subsistence households; however, real income of subsistence households falls.

Remittances, Inequality and Poverty: Evidence from Rural Mexico

Tue, 15 Nov 2005 00:00:00 +0000

Economic research has produced conflicting findings on the distributional impacts of migrant remittances, and there has been little research on the effects of changes in remittances on poverty. This paper utilizes new data from the Mexico National Rural Household Survey, together with inequality and poverty decomposition techniques, to explore the impacts of remittances on rural inequality and poverty. Our findings suggest that remmittances from international migrants become more equalizing (or less unequalizing), as well as more effective at reducing poverty, as the prevalence of migration increases.

A Recurrent Utility Function of Fictitious Generality

Tue, 20 Sep 2005 00:00:00 +0000

For the past twenty-five years, Dusansky and his associated co-authors have published a long series of papers which are based on the same price-dependent utility function. The alleged price dependence, however, is fictitious in the sense that the level of exogenous money income can replace the commodity prices. The consequence is that the demand functions derived from Dusansky's utility function are identical and observationally equivalent to the the demand functions obtained from a prototypical utility function. Since all the market and environmental effects are revealed only through the demand functions, the specification and use of a utility function such as that used by Dusansky is irrelevant and uninformative for the analysis of any economic problem where prices enter the consumer utility function and whose goal is the detection of the effects of price-dependent preferences on the demand for real goods.

Price-Induced Technical Progress in 80 years of U.S. Agriculture

Tue, 20 Sep 2005 00:00:00 +0000

This paper presents a theory of technical progress that interprets the price-induced conjecture of Hicks. It provides also an exhaustive set of comparative statics conditions that constitute the scaffolding for an empirical test of the theory. A crucial assumption is that entrepreneurs make decisions about techniques on the basis of expected information about prices and quantities. Another assumption is that these decisions are made in order to fulfill a profitability objective. The novelty of our approach is that expected relative prices enter the production function as shifter of the technology frontier. The consequence of this assumption is an expansion of the traditional Shephard lemma that is useful for identifying the portion of input quantities that have been determined by the conjecture of price-induced technical progress (PITP). The theory is applied to a sample of 80 years of US agriculture. Three versions of the general model are presented. The first version...

The International Coffee Agreement: a tax on coffee producers and consumers?

Mon, 29 Aug 2005 00:00:00 +0000

The International Coffee Agreement (ICA) used export quotas to restrict coffee trade in order to increase and stabilize the international price. A model of domestic pricing policy is developed which shows that the producer price should have fallen in response to ICA quotas. Econometric analysis supports the hypothesis that use of quotas resulted in lower producer prices in most coffee producing countries. The income lost by producers was largely captured by governments and/or exporters to whom the governments assigned quota rights. Since coffee is produced by small farmers in most exporting countries, income distribution within those countries probably worsened.

The Rise and Decline of Rent-Seeking Activity in the Brazilian Coffee Sector: Lessons from the Imposition and Removal of Coffee Export Quotas

Wed, 1 Jun 2005 00:00:00 +0000

Brazil, the world's largest coffee exporter, encouraged efforts in the 1960s to form the International Coffee Agreement (ICA), which restricted total coffee exports via country export quotas. The quotas led to significant domestic quota rents in producing countries. This paper analyzes the effects of rent seeking in Brazil. The Brazilian Institute of Coffee (IBC), which was responsible for coffee policy, was the focus of rent seeking. The paper models the policy instruments used by the IBC, shows how rent seeking affected policy, industry efficiency and the distribution of rents, explains the causes and effects of IBC reforms in the late 1980s, and draws lessons from the experience.

Forecasting in the Presence of Level Shifts

Tue, 26 Apr 2005 00:00:00 +0000

This article addresses the problem of forecasting time series that are subject to level shifts. Processes with level shifts possess a nonlinear dependence structure. Using the stochastic permanent breaks (STOPBREAK) model, I model this nonlinearity in a direct and flexible way that avoids imposing a discrete regime structure. I apply this model to the rate of price inflation in the United States, which I show is subject to level shifts. These shifts significantly affect the accuracy of out-of-sample forecasts, causing models that assume covariance stationarity to be substantially biased. Models that do not assume covariance stationarity, such as the random walk, are unbiased but lack precision in periods without shifts. I show that the STOPBREAK model outperforms several alternative models in an out-of-sample inflation forecasting experiment.

Partially Overlapping Time Series: A New Model for Volatility Dynamics in Commodity Futures

Tue, 26 Apr 2005 00:00:00 +0000

In commodity futures markets, contracts with various delivery dates trade simultaneously. Applied researchers typically discard the majority of the data and form a single time series by choosing only one price observation per day. This strategy precludes a full understanding of these markets and can induce complicated nonlinear dynamics in the data. In this paper, I introduce the partially overlapping time series (POTS) model to model jointly all traded contracts. The POTS model incorporates time-to-delivery, storability, seasonality, and GARCH effects. I apply the POTS model to corn futures at the Chicago Board of Trade and the results uncover substantial inefficiency associated with delivery on corn futures. The results also support two theories of commodity pricing: the theory of storage and the Samuelson effect.

The Market Effect of a Food Scare: The Case of Genetically Modified StarLink Corn

Tue, 26 Apr 2005 00:00:00 +0000

Genetic modification of crops has revolutionized food production, but it remains controversial due to food safety concerns. A recent food safety scare provides a natural experiment on the market's willingness to accept an increase in perceived risk from genetically modified (GM) food. We analyze the market impact of contamination of the U.S. food-corn supply by a GM variety called StarLink. We find that the contamination led to a 6.8 percent discount in corn prices and that the suppression of prices lasted for at least a year.

Computer and Internet Use by Great Plains Farmers

Mon, 25 Apr 2005 00:00:00 +0000

We use data from a 2001 survey of Great Plains farmers to explore the adoption, usage patterns, and perceived benefits of computers and the Internet. Our adoption results suggest that exposure to the technology through college, outside employment, friends, and family is ultimately more influential than farmer age and farm size. Notably, about half of those who use the Internet for farm-related business report zero economic benefits from it. Whether a farmer perceives that the Internet generates economic benefits depends primarily on how long the farmer has used the Internet for farm business and for what purposes.

Level Shifts and the Illusion of Long Memory in Economic Time Series

Mon, 25 Apr 2005 00:00:00 +0000

When applied to time series processes containing occasional level shifts, the log-periodogram (GPH) estimator often erroneously finds long memory. For a stationary short-memory process with a slowly varying level, I show that the GPH estimator is substantially biased, and I derive an approximation to this bias. The asymptotic bias lies on the (0,1) interval, and its exact value depends on the ratio of the expected number of level shifts to a user-defined bandwidth parameter. Using this result, I formulate the Modified GPH estimator, which has a markedly lower bias. I illustrate this new estimator via applications to soybean prices and stock market volatility.

Markov-switching Model Selection Using Kullback-Leibler Divergence

Mon, 25 Apr 2005 00:00:00 +0000

In Markov-switching regression models, we use Kullback-Leibler (KL) divergence between the true and candidate models to select the number of states and variables simultaneously. In applying Akaike information criterion (AIC), which is an estimate of KL divergence, we find that AIC retains too many states and variables in the model. Hence, we derive a new information criterion, Markov switching criterion (MSC), which yields a marked improvement in state determination and variable selection because it imposes an approriate penalty to mitigate the over-retention of states in the Markov chain. MSC performs well in Monte Carlo studies with single and multiple states, small and large samples, and low and high noise. Furthermore, it not only applies to Markov-switching regression models, but also performs well in Markov-switching autoregression models. Finally, the usefulness of MSC is illustrated via applications to the U.S. business cycle and the effectiveness of media advertising.<...

An Atemporal Microeconomic Theory and an Empirical Test of Price-Induced Technical Progress

Tue, 26 Oct 2004 00:00:00 +0000

An exhaustive comparative statics analysis of a general price taking cost-minimizing model of the firm operating under the influence of price-induced technical progress is carried out from a dual vista. The resulting refutable implications are observable and thus amenable to empirical verification, and take on the form of a symmetric and negative semidefinite matrix. Using data from individual cotton gins in California's San Joaquin Valley, we empirically test the complete set of implications of the price-induced technical progress theory using both classical and Bayesian statistical procedures. We find that the data are fully consistent with the atemporal, cost-minimizing, price-induced microeconomic theory of technical progress.

Robust Estimators of Errors-In-Variables Models Part 1

Mon, 25 Oct 2004 00:00:00 +0000

It is well known that consistent estimators of errors-in-variables models require knowledge of the ratio of error variances. What is not well known is that a Joint Least Squares estimator is robust to a wide misspecification of that ratio. Through a series of Monte Carlo experiments we show that an easy-to-implement estimator produces estimates that are nearly unbiased for a wide range of the ratio of error variances. These MC analyses encompass linear and nonlinear specifications and also a system on nonlinear equations where all the variables are measured with errors.

The Hass Avocado Promotion and Research Order: Offsetting Price Impacts from Imports with Advertising and Promotion

Mon, 25 Oct 2004 00:00:00 +0000

Imported avocados, which accounted for less than 1.5 percent of total U.S. avocado supply during the 1970's and 1980's, increased their share to over 44 percent in 2002-03 and further increases are on the horizon. With inelastic demand, imports placed substantial pressure on domestic avocado prices, but demand increases due to generic advertising and promotion, higher consumer incomes and population growth helped offset increased avocado supplies and domestic prices were maintained. The new Hass Avocado Promotion and Research Order will continue to offset a portion of the price impacts of increased imports from Mexico, Chile and other suppliers.

A Primal-Dual Estimator of Production and Cost Functions Within an Errors-in-Variables Context

Mon, 25 Oct 2004 00:00:00 +0000

In 1944, Marschak and Andrews published a seminal paper on how to obtain consistent estimates of a production technology. The original formulation of the econometric model regarded the joint estimation of the production function together with the first-order necessary conditions for profit-maximizing behavior. In the seventies, with the advent of econometric duality, the preference seemed to have shifted to a dual approach. Recently, however, Mundlak resurrected the primal-versus-dual debate with a provocative paper titled "Production Function Estimation: Reviving the Primal." In that paper, the author asserts that the dual estimator, unlike the primal approach, is not efficient because it fails to utilize all the available information. In this paper we propose that efficient estimates of the production technology can be obtained only by jointly estimating all the relevant primal and dual relations. Thus, the primal approach of Mundlak and the dual approach of McElroy...

The California Nursery Industry, 2002-03: Value, Growth and Economic Impacts

Wed, 8 Sep 2004 00:00:00 +0000

The California Nursery Industry, 2002-03: Value, Growth and Economic Impacts

Economies of Scale and Scope, and the Economic Efficiency of China's Agricultural Research System

Mon, 12 Jul 2004 00:00:00 +0000

Faced with the task of reorganizing the largest agricultural research system in the world, officials in China are developing a strategy for reform. This paper investigates economies of scale and scope and other potential sources of improvements in the economic efficiency of crop breeding, an industry at the heart of the nation's food economy. Using a panel data set covering 46 wheat and maize breeding institutes from 1981 to 2000, we estimate both single output and multiple output cost functions for the production of new varieties at China's wheat and maize breeding institutes. Our descriptive and analytical results indicate strong economies of scale, along with small to moderate economies of scope related to the joint production of new wheat and maize varieties. Cost efficiency increases significantly with increases in the breeders' educational status and with increases in access to genetic materials from outside the institute. Our results can help guide reformers in...

How Brazil Transferred Billions to Foreign Coffee Importers: The International Coffee Agreement, Rent Seeking and Export Tax Rebates

Mon, 24 May 2004 00:00:00 +0000

Rent seeking is well known, but empirical evidence of its effects is relatively rare. This paper analyzes how the domestic and international rent seeking caused Brazil to provide coffee export tax rebates that transferred foreign exchange to coffee importers. Although Brazil was the world's largest exporter, it began to pay export tax rebates to selected coffee importers in 1965 and, by 1988, had paid rebates totaling $8 billion. Brazil explained these rebates as a mechanism to price discriminate among importers and expand exports within the context of the export quota imposed by the International Coffee Agreement. We show this explanation was invalid during most of the period. The net price fell for those who received rebates, causing Brazil to effectively transfer approximately $3 billion to foreign importers. The effects of the rebate policy were never recognized in Brazil, hidden largely by the complex nature of government intervention in the coffee sector.

Freedom from Pollution? The State, the People, and the Environmental Kuznets Curve

Wed, 12 May 2004 00:00:00 +0000

We develop and estimate an econometric model of the relationship between several local and global air and water pollutants and economic development while allowing for critical aspects of the socio-political-economic regime of a State. We obtain empirical support for our hypothesis that democracy and its associated freedoms provide the conduit through which agents can exercise their preferences for environmental quality more effectively than under an autocratic regime, thus leading to decreased concentrations or emissions of pollution. However, additional factors such as income inequality, age distribution, and urbanization may mitigate or exacerbate the net effect of the type of political regime on pollution, depending on the underlying societal preferences and the weights assigned to those preferences by the State.

The Impact of Chilean Fruit Sector Development on Female Employment and Household Income

Thu, 1 Apr 2004 00:00:00 +0000

Modern fruit sector development in Chile led to agricultural employment for women, though usually only as temporary workers and often at a piece rate. Nonetheless, fruit sector employment offered women access to income and personal fulfillment previously lacking. This paper links the fruit sector to improving female and family economic welfare in rural Chile and changing gender relations. Using a unique longitudinal data set, we examine women's decisions regarding labor force participation and employment, their earnings and contributions to household income, and their attitudes toward employment to understand how new opportunities are changing women, their households, and the rural sector.

A New Approach for Assessing the Costs of Living with Wildlife in Developing Countries

Thu, 11 Mar 2004 00:00:00 +0000

The costs of living with wildlife are assessed using Namibian subsistence farmers' willingness to pay (WTP) for deterrents to attacks on crops and livestock as a measure of damage costs. A utility-theoretic approach jointly estimates household WTP for deterrent programs in two "currencies," maize and cash. This has a double payoff. Use of a non-cash staple increases respondent comprehension and provides more information about preferences, improving the accuracy of results. The household shadow value of maize is also identified. Significant costs from living with elephants and other types of wildlife are demonstrated. Compensation for farmers may be warranted on equity and efficiency grounds. Uncontrolled domestic cattle generate even higher costs to farmers than wildlife, highlighting the need to clarify property rights among these farmers.

Hazards of Expropriation: Tenure Insecurity and Investment in Rural China

Wed, 19 Mar 2003 00:00:00 +0000

This paper uses household data from Northeast China to examine the link between investment and land tenure insecurity induced by China’s system of village-level land reallocation. We quantify expropriation risk using a hazard analysis of individual plot tenures and incorporate the predicted “hazards of expropriation” into an empirical analysis of plot-level investment. Our focus is on organic fertilizer use, which has long lasting benefits for soil quality. Although we find that higher expropriation risk significantly reduces application of organic fertilizer, a welfare analysis shows that guaranteeing land tenure in this part of China would yield only minimal efficiency gains.

Economic Reform and the Changing Pattern of China's Agricultural Trade

Wed, 19 Mar 2003 00:00:00 +0000

This paper examines the composition of China’s trade from 1980 to 1996, with a focus on agriculture and a view towards understanding its changing structure relative to other sectors. We analyze the time series behavior of individual goods at the SITC three-digit level, categorized into three groups: agricultural commodities, “other primary” commodities, and manufactures. We find that agricultural trade has expanded along comparative advantage lines in a very modest way, compared to manufactures and other primary commodities.

Cost Economies: A Driving Force for Consolidation and Concentration?

Wed, 19 Mar 2003 00:00:00 +0000

Expanding concentration in many industries has generated concern about the extent and determinants of these market structure patterns. Understanding such trends requires information on technological characteristics underlying cost efficiency. However, market structure and power analyses are typically based on restrictive models that limit the representation of cost drivers. In this paper we model and estimate a comprehensive cost specification allowing for utilization, scale, scope, and multi-plant economies, using U.S. beef packing plant data. We find evidence that these cost economies are substantive, and in combination cause a short-fall of marginal from average cost, provide economic motivations for concentration, consolidation, and diversification, and facilitate the interpretation and use of market structure measures.

Seasonal Adjustment in a Market for Female Agricultural Workers in Chile

Wed, 19 Mar 2003 00:00:00 +0000

Traditionally, the analysis of labor market adjustment refers to the interaction between the demand and the supply for labor, e.g., between employers and job seekers. The labor market is said to 'clear' when the wage and labor force participation adjust so that supply and demand are equal. However, it has been observed that the adjustment process in the agricultural casual labor market is often uneven and incomplete. This phenomenon has challenged economists to search for additional explanation of the workings of these markets (see for example Rosenzweig, 1986; Binswanger and Rosenzweig, 1981). Our study contributes to the literature by examining this issue using a Chilean data set collected by one of the authors in which pronounced seasonality is evident in both labor demand and labor supply, resulting in large changes in wages, participation and unemployment.

The principal objective of this paper is to analyze the socio-economic and demographic factors that determine...

How Competitive is the World Wheat Market?

Tue, 18 Mar 2003 00:00:00 +0000

Japan is one of the largest importers of wheat in the world, with imports originating from three countries, Australia, Canada, and the United States. Australia, Canada, and Japan all use a government single-desk agency to control wheat trade. Many previous studies on competition in the world grain trade have argued the market is imperfectly competitive, and they often point to the Japanese market. We study the Japanese wheat import market for this reason, but find no compelling evidence of imperfect competition.

Agricultural Productivity Growth in China: Farm Level versus National Measurement

Mon, 17 Mar 2003 00:00:00 +0000

Agricultural Productivity Growth in China: Farm Level versus National Measurement

Cost Economies And Market Power: The Case Of The U.S. Meat Packing Industry

Mon, 10 Mar 2003 00:00:00 +0000

Increasing size of establishments and resulting concentration in US industries may stem from various types of cost economies. In particular, scale economies arising from technological factors embodied in plant and equipment may be a driving force for such market structure changes. In this case typical market power measures like Lerner indexes can be misleading; if scale (cost) economies prevail, cost efficiencies rather than market deficiencies may actually underlie the observed patterns. In this study I provide measures of scale economies and market power for the US meat packing industry, where increased consolidation and concentration have raised great concern in policy circles. The results suggest that this trend has been motivated by cost economies, but that little excess profitability exists, and on the margin the potential for taking further advantage of such economies has become minimal.

Thoughts on Productivity, Efficiency and Capacity Utilization Measurement for Fisheries

Mon, 10 Mar 2003 00:00:00 +0000

Thoughts on Productivity, Efficiency and Capacity Utilization Measurement for Fisheries

Tracing the Effects of Agricultural Commodity Prices on Food Processing Costs

Mon, 10 Mar 2003 00:00:00 +0000

Although food processing sector production is inherently linked to the availability and prices of agricultural materials (MA), this link appears to be weakening due to adaptations in input costs, technology, and food consumption patterns. This study assesses the roles of these changes on food processors’ costs and output prices, with a focus on the demand for primary agricultural commodities. Our analysis of the 4-digit U.S. food processing industries for 1972-1992 is based on a cost-function framework, augmented by a profit maximization specification of output pricing, and a virtual price representation for agricultural materials and capital. We find that falling virtual prices of MA and input substitution have provided a stimulus for MA demand. However, scale effects have been MA-saving relative to intermediate food products, and disembodied technical change has strongly contributed to declining primary agricultural materials demand relative to most other inputs.

Community-Level Determinants of Child Growth

Wed, 5 Mar 2003 00:00:00 +0000

The present study uses a socioecological-economic approach to identify community-level factors that influence the physical growth of young children. A multidisciplinary team of investigators collaborated to study the different prevalence rates of low growth among children living in 24 communities located in a tea plantation near Bandung, West Java, Indonesia. Measurements of weight and length were taken for 415 children between the ages of 6 and 18 months. Low growth prevalence rates were determined by calculating the number of children in each community who fell below two anthropometric cutoffs. Epidemiological and ethnographic methods were used to measure community infrastructure and services related to child growth. The principal finding is that a probit model using community-level variables successfully predicted the prevalence rates of low growth across communities. Quality community vaccination programs, child care services, environmental sanitation and latrines...

Do Quality Incentives Matter?

Wed, 5 Mar 2003 00:00:00 +0000

We utilize an unusual data set, involving fifteen tomato growers over four years, to analyze the impact of incentive contracts on behavior. Each grower delivers processing tomatoes under a price incentives contract and for a fixed price per ton. Our comparison of the quality of the tomatoes delivered under the two arrangements confirms that growers do respond to incentive contracts by improving tomato quality, as predicted by economic theory. The comparison is not confounded by the usual contract endogeneity and simultaneity problems, due to characteristics of the processing tomato industry and our data set.

Worker and Firm Determinants of Piece Rate Variation in an Agricultural Labor Market

Wed, 5 Mar 2003 00:00:00 +0000

Worker and Firm Determinants of Piece Rate Variation in an Agricultural Labor Market

Productivity and Efficiency in the U.S. Food System, or, Might Cost Factors Support Increasing Mergers and Concentration?

Tue, 4 Mar 2003 00:00:00 +0000

Productivity and Efficiency in the U.S. Food System, or, Might Cost Factors Support Increasing Mergers and Concentration?

Effective Costs and Chemical Use in US Effective Costs and Chemical Use in US of Using the Environment as a "Free" Input

Tue, 4 Mar 2003 00:00:00 +0000

This study uses a cost-function-based model of production processes in the U.S. agricultural sector to represent producers’ input and output decisions, and the implied costs of reductions in risk associated with leaching and runoff from agricultural chemical use. The model facilitates evaluation of the statistical significance of measured shadow values of "bad" outputs and their input- and output-specific components. Of special interest are the impacts on pesticide demand and its quality and quantity aspects. The shadow values of risk reduction are statistically significant, and imply increased demand for "effective" pesticides that come mainly from embodied technology leading to improvements in quality.

Is It Better to Be a Boy? A Disaggregated Outlay Equivalent Analysis of Gender Bias in Papua New Guinea

Wed, 26 Feb 2003 00:00:00 +0000

Discrimination in the allocation of goods between boys and girls within households in Papua New Guinea is examined using Deaton’s (1989) outlay-equivalent ratio method. Adding a boy to the household reduces expenditure on adult goods by as much as would a nine-tenths reduction in total outlay per member, but girls have no effect on adult goods expenditure. The hypothesis of Haddad and Reardon (1993) that gender bias is inversely related to the importance of female labour in agricultural production is not supported. There is no evidence of bias against girls in the urban sector.

How Elastic is Calorie Demand? Parametric, Nonparametric, and Semiparametric Results for Urban Papua New Guinea

Wed, 26 Feb 2003 00:00:00 +0000

This paper seeks further evidence on the elasticity of calorie demand with respect to household resources. The case presented is for urban areas of Papua New Guinea, where just over one-half of the population appear to obtain less than the recommended amount of dietary energy. The relationship between per capita calorie consumption and per capita expenditure in urban areas of Papua New Guinea is not consistent with the view that income changes have negligible effects on nutrient intakes. The unconditional calorie demand elasticity is approximately 0.6 for the poorest half of the population, most of whom have less than the recommended 2000 calories per day available to them. Using parametric and semiparametric estimation to control for a wide range of other influences on calorie consumption does not materially reduce the size of the elasticity. Therefore, these results are not supportive of "growth-pessimism" and instead suggest that policies that increase urban household...

Land Rights, Farmer Investment Incentives, and Agricultural Production in China

Wed, 26 Feb 2003 00:00:00 +0000

The overall goal of our paper is to estimate the impact of China's land rights on farm investment incentives and agricultural production. To meet the goal, the paper pursues three specific objectives. First, the paper briefly reviews the various linkages between land rights and investment incentives. Next, we demonstrate how land use behavior differs according to the tenure regime and land rights. Third, by using our field survey data, this paper identifies the links between specific land rights, instead of just the land tenure type, and investment incentives. The paper also measures the size of efficiency loss from the current land rights arrangements.

Transition and Agriculture