Volume 25, Issue 1, July 2000

July, 2000

By: Espey, Molly; McFadden, Dawn Thilmany
Previous research on farm labor demand is reviewed to empirically explore what has been learned over the past 50 years. Following the example of Hamermesh, studies were differentiated by numerous factors. A meta-regression analysis of estimated demand wage elasticities was conducted to more clearly identify any systematic factors that influence such estimates. Results of the analysis show that the magnitudes of own-price demand elasticities are affected by differences including type and area of labor market, methodology, and the time period covered by the data. Understanding variations due to model specification is important when interpreting current and future agricultural labor and policy research.

July, 2000

As traditional forms of agricultural protection continue to decline, agricultural interests will likely seek alternative protection in the form of technical barriers. A flexible framework for theoretically and empirically analyzing technical barriers under various sources of uncertainty is derived. Attention is focused on uncertainty arising from the variation in the product attribute levels, a source not yet considered by the literature. Ex ante and ex post densities of domestic and international quantities and prices as well as the densities of their respective extreme-order statistics are derived. An example is presented to illustrate the application of the developed framework.

July, 2000

By: Richards, Timothy J.; Jeffrey, Scott R.
Using measures of allocative, technical, and overall efficiency as indicators of a latent "performance" variable, and a set of farm operating ratios as indicators of the amount of effort to improve the quality of feeding, breeding, and labor productivity, we employ a multiple-indicator, multiple-cause (MIMIC) model of Alberta dairy production to determine the factors that contribute to economic performance. Gains in performance may be made through increased milk yield, herd size, breeding program quality, and labor quality, but not by operator experience or increased expenditures on feeding programs. Consequently, the industry trend toward larger dairy herds may indeed improve the economic performance of dairy operators.

July, 2000

By: Smith, Elwin G.; Lerohl, Mel L.; Messele, Teklay; Janzen, H. Henry
We develop a dynamic soil quality model to evaluate optimal cropping systems in the northern Great Plains. Modeling soil quality attributes is feasible, and attribute model results apply to a wide range of soils. A crop production system with continuous spring wheat and direct planting is the most profitable system. This system has low soil erosion and high quality attributes, indicating the benefits of increased soil quality exceed the higher maintenance costs. On-site value of additional soil organic carbon (OC) ranges from $1 to $4/ton OC/hectare/year. These values for soil OC impact the optimum tillage practice, but not the crop rotation.

July, 2000

By: Richards, Timothy J.
Recent proposals to reform the federal Multiple-Peril Crop Insurance Program for specialty crops raised concerns that a higher cost for catastrophic-level coverage would significantly reduce program participation. This study estimates the demand for three levels of insurance coverage (50%, 65%, 75%) using aggregate data from grape production in 11 California counties from 1986-96. A discrete/continuous econometric model of the choice of coverage level and the amount of insurance finds that the price-elasticity of demand for 50% coverage is elastic, suggesting that premium increases may indeed reduce participation significantly. Such increases may also cause a significant reallocation of growers among coverage levels.

July, 2000

By: Barrett, Christopher B.; Li, Jau-Rong; Bailey, DeeVon
This study uses a new market analysis methodology to examine price and trade relationships in eight Pacific Rim factor and product markets central to the Canadian and U.S. pork industries. The new method enables direct estimation of the frequencies with which a variety of market conditions occur, including competitive equilibrium, tradability, and segmented equilibrium. While extraordinary profit opportunities emerge episodically in a few niche markets, the vast majority of the markets studies are highly competitive- exhibiting zero estimated marginal profits to spatial arbitrage at monthly frequency- and internationally contestable. With a few notable exceptions due primarily to nontariff barriers, and despite significant remaining tariffs in some niches, the Pacific Rim is effectively a single market for pork producers and processors today.

July, 2000

By: Goodwin, Barry K.; Roberts, Matthew C.; Coble, Keith H.
A variety of crop revenue insurance programs have recently been introduced. A critical component of revenue insurance contracts is quantifying the risk associated with stochastic prices. Forward-looking, market-based measures of price risk which are often available in form of options premia are preferable. Because such measures are not available for every crop, some current revenue insurance programs alternatively utilize historical price data to construct measures of price risk. This study evaluates the distributional implications of alternative methods for estimating price risk and deriving insurance premium rates. A variety of specification tests are employed to evaluate distributional assumptions. Conditional heteroskedasticity models are used to determine the extent to which price distributions may be characterized by nonconstant variances. In addition, these models are used to identify variables which may be used for conditioning distributions for rating purposes. Discrete mixtures of normals provide flexible parametric specifications capable of recognizing the skewness and kurtosis present in commodity prices

July, 2000

By: Kim, Sung-Yong; Nayga, Rodolfo M., Jr.; Capps, Oral, Jr.
This study examines the impact of consumers' use of food labels on selected nutrient intakes of Americans. Endogenous switching regression techniques are employed to control for heterogeneity in the label use decision. When the nutrient intakes of label users and the expected nutrient intakes of label users in the absence of labels are compared, food label use decreases individuals' average daily intakes of calories from total fat and saturated fat, cholesterol, and sodium by 6.90%, 2.10%, 67.60 milligrams, and 29.58 milligrams, respectively. In addition, consumer nutrition label use increases average daily fiber intake by 7.51 grains.

July, 2000

By: Knapp, Keith C.; Sadorsky, Perry A.
A dynamic optimization model for agroforestry management is developed where tree biomass and soil salinity evolve over time in response to harvests and irrigation water quantity and quality. The model is applied to agroforestry production in the San Joaquin Valley of California. Optimal water applications are at first increasing in soil salinity, then decreasing, while the harvest decision is relatively robust to changes in most of the underlying economic and physical parameters. Drainwater reuse for agroforestry production also appears promising: both net reuse volumes and the implied net returns to agroforestry are substantial.

July, 2000

By: Wilson, Paul N.
Economists, including agricultural economists, have a long history of recognizing the importance of the behavioral foundations in decision making while ignoring these observable human dimensions in their economic models. The economics of social capital and trust, two important human characteristics influencing decisions, have captured the attention of economists in recent years. Recent empirical work demonstrates that social capital and trust considerations are prevalent and economically significant, especially in business. Trust alters the terms of trade, generates decision flexibility, reduces transaction costs, and creates additional time resources for management.