Volume 30, Issue 1, April 2005

By: Furtan, William Hartley; Gray, Richard S.; Holzman, J.J.
This study examines the optimal approval strategy for genetically modified (GM) wheat varieties in Canada and the United States. Without an affordable segregation system, the introduction of GM wheat will create a market for "lemons" that will result in the loss of important export markets. Using a differentiated product trade model for spring wheat, with endogenous technology pricing, a payoff matrix is generated for the possible approval outcomes. Results show that the existence of the market externality removes the first-mover advantage for wheat producers from the approval of the new GM wheat variety. There are large distributional effects; wheat producers lose economic surplus, while consumers and the biotech company gain economic surplus. With a larger domestic market, the United States is more likely to experience net gain in economic surplus from the introduction of GM wheat.
By: Characklis, Gregory W.; Griffin, Ronald C.; Bedient, Philip B.
Approaches for evaluating salinity management benefits are generalized and extended to incorporate consideration of desalination and long-term changes in salinity concentration and water use patterns. Previous research indicates urban users incur the vast majority of salinity-related damages in affected regions, suggesting municipalities may benefit by considering mitigating actions independent of agriculture. However, previous studies have included no consideration of desalination. Earlier studies have also considered stepped increases in salinity, assuming a single future concentration when estimating the long-term benefits of salinity reduction, an approach inconsistent with the incremental nature of these increases. Long-term changes in water use patterns (urban vs. agricultural), when considered at all, have often been treated in the same stepwise fashion. For this analysis, a suitable region is selected and the benefits of a hypothetical salinity management program are estimated using the approach described. These results are then compared with those obtained through the use of several previous methods. Findings suggest that consideration of desalination and incremental variations in salinity and water use patterns can substantially lower the estimated benefits of regional salinity management programs.
By: Vergara, Oscar; Coble, Keith H.; Hudson, Darren; Knight, Thomas O.; Patrick, George F.; Baquet, Alan E.
This paper examines the use of market consultants and market information systems by grain and cotton producers. A model of producer demand for marketing information and consultants is proposed that decomposes price received into exogenous and endogenous components. The analysis is based on a survey of over 1,600 producers. The results suggest that expenditures on market information systems and market consultants are not independent and, more specifically, expenditures on marketing consultants substitute for expenditures on market information systems.
By: Diersen, Matthew A.; Sherrick, Bruce J.
Estimates of country-level loan default distributions are developed and used in a loan guarantee model to value the contingent liability of USDA's General Sales Manager (GSM) export credit guarantee portfolio. The results quantify the relationship between increasing guarantee coverage and the resulting actuarial liability to the government. Optimal coverage levels and optimal country-level allocations are determined for given policy objectives and coverage totals. Findings reveal that the government's allocation of country guarantees is risk-inefficient; and guidance is provided for making risk-efficient allocations for any program size.
By: Lusk, Jayson L.; Jamal, Mustafa; Kurlander, Lauren; Roucan, Maud; Taulman, Lesley
A plethora of research in recent years has been devoted to estimating consumer demand for genetically modified food, an important piece of information needed to create appropriate public policy. To examine this body of work, a meta-analysis was conducted of 25 studies that, in aggregate, report 57 valuations for GM food. Findings indicate as much as 89% of the variation in existing value estimates for genetically modified food can be explained by an econometric model that controls for (a) the characteristics of the sample of consumers studied, (b) the method for eliciting consumers' valuation, and (c) characteristics of the food being valued. Each of these factors has a statistically significant effect on estimated premiums for non-GM food. Results of this study effectively summarize the extant literature on consumer demand for genetically modified food and permit the creation of some stylized facts that are not conditional on the results of one particular study. This paper also illustrates the effect of methodological choices on valuation estimates and reports a model which allows researchers and policy makers to quickly generate valuation measures for use in marketing or cost benefit analysis.
By: Herath, Deepananda P.B.; Weersink, Alfons; Carpentier, Chantal Line
This study examines the factors affecting state annual share of national inventory for each of the hog, dairy, and fed-cattle sectors using data from the 48 contiguous states for 1976 to 2000. The paper develops a state specific, time-series environmental stringency measure and introduces instrumental variables to control for the possible endogeneity bias between livestock production decisions and regulatory stringency. The results indicate that differences in the severity of environmental regulations facing livestock producers have had a significant influence on production decisions in the dairy, and particularly the hog sector.
By: Lai, Ching-Chong; Hu, Shih-Wen; Fan, Chih-Ping
By allowing for various degrees of asset substitutability between bonds and agricultural products, this paper reexamines the robustness of the overshooting hypothesis of agricultural product prices. It is found, in both a closed economy and an open economy, that the crucial factor determining whether agricultural prices overshoot or undershoot their long-run response following an expansion in the money stock depends upon the extent of asset substitutability between bonds and agricultural goods.
By: Peterson, Everett B.; Orden, David
A competitive partial-equilibrium spatial model with heterogeneous goods is constructed to evaluate effects of the removal of tariffs, tariff-rate quotas, and sanitary regulations on world poultry trade. The model distinguishes between "highvalue" (mostly white meat) and "low-value" (mostly dark meat) poultry products and simulates the trade flows among eight exporting and importing countries and regions. Removing all barriers simultaneously has a larger impact on trade than removing only tariffs and tariff-rate quotas. Imposition of sanitary barriers against U.S. products by Russia shifts trade flows, but does not have large net impacts on U.S. producers.
By: Baerenklau, Kenneth A.
This analysis extends previous work on green insurance by proposing a mechanism that offers a stronger adoption incentive and is applicable to heterogeneous populations and non-binary adoption decisions. Endogenous learning about the new technology is incorporated, and empirically calibrated simulation results are presented for the case of reduced-phosphorus dairy diets. Results show that the mechanism has a significant impact on behavior and may incur no net cost for the regulator when an insurance premium is charged. Conditions under which a green payment mechanism may be preferable to green insurance also are discussed.
By: McCluskey, Jill J.; Loureiro, Maria L.
This paper analyzes a monopolist's behavior when consumers cannot observe the production standards. These types of products are usually known as credence goods. The steady-state level of quality with credence goods is found to be lower than that with experience goods, and perfect information goods. The finding that only perceived quality, which is effectively a filtered version of true quality, affects reputation indicates rewards for high quality production are lower in the credence good case. Further, an increase in the level of monitoring can increase the true level of product quality in the market for credence goods.