2002

December, 2002

GREEN PAYMENT PROGRAMS FOR NONPOINT SOURCE POLLUTION CONTROL: HOW IMPORTANT IS TARGETING FOR COST-EFFECTIVENESS?

By: Baerenklau, Kenneth A.
Mechanism design theory is used to examine the case of a cost-minimizing regulator who uses input-reduction subsidies to meet an exogenously imposed ambient standard for nonpoint source pollution. A general result claimed for a welfare-maximizing equilibrium. Numerical results suggest the ability to directly target contracts reduces costs significantly for the regulator. But in the absence of this ability, indirect targeting reduces costs only slightly.
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December, 2002

A COMPLETE CHARACTERIZATION OF THE LINEAR, LOG-LINEAR, AND SEMI-LOG INCOMPLETE DEMAND SYSTEM MODELS

By: von Haefen, Roger H.
This study extends LaFrance's (1985, 1986, 1990) previous research by deriving the necessary parameter restrictions for two additional classes of incomplete demand system models to be integrable. In contrast to LaFrance's earlier work, this analysis considers models that treat expenditures and expenditure shares as the dependent variables in the specified incomplete demand systems. With environmental economists increasingly turning to demand system approaches to value changes in environmental quality, these new results significantly expand the menu of empirical specifications which can be used to fit a given data set. Moreover, the alternative specifications considered in this study, in combination with LaFrance's original work, represent a complete characterization of the linear, log-linear, and semi-log incomplete demand system models.
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December, 2002

WILLINGNESS TO PAY FOR WATER QUALITY IMPROVEMENTS: THE CASE OF PRECISION APPLICATION TECHNOLOGY

By: Hite, Diane; Hudson, Darren; Intarapapong, Walaiporn
A contingent valuation survey conducted in Mississippi is used to assess public willingness to pay for reductions in agricultural nonpoint pollution. The analysis focuses on implementation of a policy to provide farmers with precision application equipment to reduce nutrient runoff. Findings suggest public support exists for such policies. This study also finds that inclusion of debriefing questions can be used to refine willingness-to-pay estimates in contingent valuation studies. A nonparametric scope test suggests respondents are sensitive to level of runoff reduction and associated water-quality benefits.
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December, 2002

DIRECT AND INDIRECT SHADOW PRICE AND COST ESTIMATES OF NITROGEN POLLUTION ABATEMENT

By: Shaik, Saleem; Helmers, Glenn A.; Langemeier, Michael R.
The implications of treating environmental pollution as an undesirable output (weak disposability) as well as a normal input (strong disposability) on the direct and indirect shadow price and cost estimates of nitrogen pollution abatement is analyzed using Nebraska agriculture sector data. The shadow price of nitrogen pollution abatement treated as an undesirable output represents the reduced revenue from reducing nitrogen pollution. In contrast, the shadow price of nitrogen pollution abatement treated as an input reflects the increased cost of reducing nitrogen pollution. For the 1936-97 period, the estimated shadow price and cost of nitrogen pollution abatement for Nebraska ranges from $0.91 to $2.21 per pound and from $300 to $729 million respectively.
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December, 2002

USING SATELLITE IMAGERY IN PREDICTING KANSAS FARMLAND VALUES

By: Nivens, Heather D.; Kastens, Terry L.; Dhuyvetter, Kevin C.; Featherstone, Allen M.
Can remotely sensed imagery improve hedonic land price models? A remotely sensed variable was added to a hedonic farmland value model as a proxy for land productivity. Land cover data were used to obtain urban and recreational effects as well. The urban and recreational effects were statistically significant but economically small. The remotely sensed productivity variable was statistically significant and economically large, indicating that knowing the "greenness" of the land increased the explanatory power of the hedonic price model. Thus, depending upon the cost of this information, including remotely sensed imagery in traditional hedonic land price models is economically beneficial.
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December, 2002

ESTIMATING WILLINGNESS TO PAY FOR REDUCED COPPER CONTAMINATION IN SOUTHWESTERN MINNESOTA

By: Kim, Hong Jin; Cho, Yongsung
The contingent valuation method is applied to determine how much consumers would be willing to pay to reduce copper in their drinking water and what factors influence their willingness to pay (WTP). The annual mean WTP per household was estimated using survey data from nine counties in southwestern Minnesota where copper contamination is high. The annual mean WTP per household varied from a low range of $30.41 to $43.61 for Chippewa County to a high range of $39.79 to $57.06 for Nobles County. The aggregate WTP for all nine counties was estimated to range from $1.66 to $2.38 million. However, the estimated WTP may not be sufficient to pay the cost of providing improved water through public water systems for small communities in southwestern Minnesota.
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December, 2002

CROSS-SECTIONAL ESTIMATION OF U.S. DEMAND FOR BEEF PRODUCTS: A CENSORED SYSTEM APPROACH

By: Yen, Steven T.; Huang, Chung L.
Demands for beef products are investigated using the U.S. Department of Agriculture's 1987-88 Nationwide Food Consumption Survey data. The censored translog demand system is estimated with full-information and simulated maximum-likelihood procedures. These procedures represent different approaches to evaluation of multiple probability integrals in the likelihood function, but produce very similar parameter and elasticity estimates. Findings suggest sociodemographic variables play important roles in the demand for beef, and that demand for different cuts of beef should be treated differently.
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December, 2002

CHANGES IN THE WELL-BEING OF NONMETROPOLITAN SINGLE-MOTHER FAMILIES: A SEMI-PARAMETRIC ANALYSIS

By: Mills, Bradford F.
In nonmetropolitan areas of the United States, single-mother families contain a majority of children living below the poverty line. Changes between 1992 and 2000 in the economic well-being of nonmetropolitan single-mother families are examined using kernel density estimation and density reweighting methods. The results show that increased education levels of single mothers and the strengthening of area economic conditions explain much of the observed gains in the economic well-being of this family group. But temporal changes in propensities to work and to be on welfare from 1992 to 2000 have also contributed to observed gains.
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December, 2002

AIDS VERSUS THE ROTTERDAM DEMAND SYSTEM: A COX TEST WITH PARAMETRIC BOOTSTRAP

By: Dameus, Alix; Richter, Francisca G.-C.; Brorsen, B. Wade; Sukhdial, Kullapapruk Piewthongngam
A Cox test with parametric bootstrap is developed to select between the linearized version of the First-Difference Almost Ideal Demand System (FDAIDS) and the Rotterdam model. A Cox test with parametric bootstrap has been shown to be more powerful than encompassing tests like those used in past research. The bootstrap approach is used with U.S. meat demand (beef, pork, chicken, fish) and compared to results obtained with an encompassing test. The Cox test with parametric bootstrap consistently indicates the Rotterdam model is preferred to the FDAIDS, while the encompassing test sometimes fails to reject FDAIDS.
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December, 2002

INSURING THE STEWARDSHIP OF BT CORN: ‘A CARROT’ VERSUS ‘A STICK’

By: Mitchell, Paul D.; Hurley, Terrance M.; Babcock, Bruce A.; Hellmich, Richard L.
Subsidies and fines are compared to voluntary and mandatory refuge insurance (insurance for pest damage on Bt corn refuge) as mechanisms for securing grower compliance with EPA refuge mandates. A conceptual model partially ranks mechanisms. Tradeoffs between mechanisms using grower welfare, payments to growers, and monitoring frequency are quantified empirically. Grower welfare is lowest with mandatory insurance because growers pay all costs, and is highest with direct refuge subsidies because public funds or companies subsidize all costs. Assuming typical premium loads and ignoring distribution considerations, we develop monitoring budgets for fines and subsidies, above which voluntary or mandatory insurance is better.
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December, 2002

MEAT TRACEABILITY: ARE U.S. CONSUMERS WILLING TO PAY FOR IT?

By: Dickinson, David L.; Bailey, DeeVon
This article reports the results form a series of laboratory auction markets in which consumers bid on meat characteristics. The characteristics examined include meat traceability (i.e., the ability to tract the retail meat back to the farm or animal of hormones, or knowing the animal was humanely treated), and extra assurances (e.g., extra meat safety assurances). This laboratory study provides non-hypothetical bid data on consumer preferences for a sample of consumers in Logan, Utah, for traceability, transparency, and assurances (TTA) in red meat at a time when the United States currently lags other countries in development of TTA meat systems. Results suggest these consumers would be willing to pay for such TTA meat characteristics, and the magnitude of the consumer bids reveals that a profitable market for development of TTA systems in the United States might exist.
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December, 2002

END MATERIALS

This section includes: JARE Editor's Report, October 2002; Reviewers October 2001-October 2002; WAEA 2001 Award Winners; WAEA Past Presidents, 1927-2002; Past Editors; Minutes of 2002 WAEA Joint Executive Committee and Executive Council Meeting; Author Guidelines for Submitting Manuscripts to JARE; Membership Information; Back Cover
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December, 2002

TOTAL FACTOR PRODUCTIVITY AND PROCESSED FOOD TRADE: A CROSS-COUNTRY ANALYSIS

By: Gopinath, Munisamy; Carver, Jason
Processed food products account for a growing share of global agricultural trade. Growth in total factor productivity and intersectoral linkages between agricultural and processed foodsectors are hypothesized as factors explaining this phenomenon. Estimating the neoclassical trade model using an internationally comparable database, we find evidence of (a) Hechsher-Ohlin (factor endowments) and Ricardian-type (technology) effects in agricultural and processed food trade, and (b) transfer of comparative advantage from the primary agricultural sector to the processed food sector. Thus, public policies protecting primary agriculture can adversely affect processed food sectors, while those supporting R&D efforts can bring about dynamic and comparative advantage.
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December, 2002

DOES BRANDED FOOD PRODUCT ADVERTISING HELP OR HURT FARMERS?

By: Zhang, Mingxia; Sexton, Richard J.; Alston, Julian M.
This study investigates market conditions when food processor/handler brand advertising, whether undertaken by an investor-owned firm or by a cooperative, will benefit or harm farmers. Addressing this question provides insight into the policy issue of whether and when promotion funds intended to benefit farmers should be used in support of brand advertising. Analysis of a two-stage oligopoly-oligopsony model shows that advertising by an investor-owned firm is most likely to be harmful to farmers when it takes place in a relatively unconcentrated industry and when advertising is relatively more effective at creating brand market power than at increasing total demand.
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December, 2002

VALUE OF INCREASING KERNEL UNIFORMITY

By: Yoon, Byung-Sam; Brorsen, B. Wade; Lyford, Conrad P.
Kernel uniformity is an important quality attribute that can now be measured at low cost. This study analyzes the profitability of sorting to increase wheat kernel uniformity. Nonlinear programming is used to sort grain loads to maximize flour yield by increasing uniformity of kernel size and kernel hardness. Results of this analysis suggest increases in flour yield due to higher kernel uniformity are not enough to outweigh the costs of sorting.
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December, 2002

A DYNAMIC ANALYSIS OF THE EFFECTS OF A PRICE SUPPORT PROGRAM ON PRICE DYNAMICS AND PRICE VOLATILITY

By: Kim, Kwansoo; Chavas, Jean-Paul
This study presents an econometric analysis of the effects of a government price support program on price dynamics and price volatility. Price support programs, a common feature of agricultural policy, provide a lower-bound censoring of the distribution of market prices. An econometric model of market prices is developed using a dynamic Tobit specification under time-varying volatility. The model is applied to the U.S. non-fat dry milk market. It is used to investigate the impact of market liberalization on price dynamics and price volatility in the presence of private and public stocks. The econometric results show how the price support program and stocks (both private and public) affect expected price volatility.
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December, 2002

EFFICIENCY OF SMALL LANDHOLDERS IN EASTERN PARAGUAY

By: Fletschner, Diana K.; Zepeda, Lydia
The relative efficiency levels of 283 rural households from three regions in eastern Paraguay are measured using a nonparametric approach. Technical, allocative, and scale efficiency measures are calculated both at national and regional levels, and factors that may affect the efficiency levels are analyzed econometrically. The three regions selected for this study represent distinct production systems and socio-economic conditions: production of traditional crops or extensive livestock operations; a dynamic region with massive in-migration where capitalized farms produce soybeans and wheat; and an older region, integrated with urban areas, where depleted and highly fragmented land has forced households to rely on nonagricultural sources of income. Nonparametric results show high levels of technical efficiency across all three regions, but low levels of allocative and scale efficiency. Because policies to increase scale efficiency are politically unpalatable, the factors affecting allocative efficiency are explored. Significant factors include employment opportunities, land titling, and access to credit, markets, and extension services.
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