Volume 32, Issue 3, December 2007

December, 2007

Finding Peace for Economists in Universities

By: Johnson, Marc A.
Evidence suggests that economists and agricultural economists have an unusual ability to create anxiety for university administration. Interviewers with university provosts and deans revealed support for faculty conducting relevant policy analysis, and discomfort with economists' participation in internal university decision making. The conflict is addressed by considering the nature of the decision environment, specification of decision variables, and the demand for policy evaluation to inform economists how they might contribute their expertise in a peaceful and effective manner. economists can help central administration, as policy makers, to establish systems of incentives, success metrics, and divisions of authority which match the locus of specialized knowledge.
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December, 2007

The Effect of Innovation on Agricultural and Agri-food Exports in OECD Countries

By: Ghazalian, Pascal L.; Furtan, William Hartley
This paper investigates the effect of innovation on primary agricultural and processed food product exports among the Organization for Economic Cooperation and Development (OECD) countries. A theoretical gravity equation that accounts for innovation is derived. The empirical exercise uses panel data sets covering 21 OECD countries for the period 1990-2003. The R&D capital stock is employed as a tangible way of measuring innovation. Empirical results show that R&D has enhanced exports in the primary agricultural sector. Meanwhile, the market expansion effect of R&D appears to be more than offset by the market power effect in the food processing sector, resulting in a decrease in exports. Also, evidence was found of a positive vertical channeling effect through which R&D in the primary agricultural sector increases exports of processed food products.
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December, 2007

A Choice Model with Systematic Structures in Decision Weights

By: Hu, Wuyang
This article introduces a discrete choice model which incorporates a nonlinear structural adjustment to the standard utility coefficients or decision weights. The proposed model is theoretically and empirically appealing when compared to several alternative approaches, and it can be estimated by conventional maximum likelihood. Application of the proposed model in a case study shows that it outperforms two competing approaches in model fit. Given its simplicity, this model is also capable of revealing consumers' heterogeneous choices. It is shown that based on consumers' different characteristics, their product choice and its welfare implications are also potentially different.
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December, 2007

Fast Food, Addiction, and Market Power

By: Richards, Timothy J.; Patterson, Paul M.; Hamilton, Stephen F.
Many attribute the rise in obesity since the early 1980's to the overconsumption of fast food. A dynamic model of a different-product industry equilibrium shows that a firm with market power will price below marginal cost in a steady-state equilibrium. A spatial hedonic pricing model is used to test whether fast food firms set prices in order to exploit their inherent addictiveness. The results show that firms price products dense in addictive nutrients below marginal cost, but price products high in nonaddictive nutrients higher than would be the case in perfect competition.
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December, 2007

Political Economy of the U.S. Cattle and Beef Industry: Innovation Adoption and Implications for the Future

By: Bailey, DeeVon
Market innovation and investment are key elements contributing to the health and success of any industry. However, U.S. cattle and beef interests appear to be resisting some of the market innovations that are occurring in their industry. This includes resisting innovations designed to provide more information and transparency in the marketing chain, such as additional traceability provided by animal identification systems. This paper discusses how institutions supporting the U.S. cattle and beef industry may be failing the industry in terms of helping it adjust to new market conditions, including failing to help the industry foster market innovation. Recommendations are given relating to the first steps of government and the land-grant system can take to change research and extension agendas relating to the beef industry.
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December, 2007

End Materials

This section includes: Abstracts of 2007 Western Agricultural Economics Association Invited and Selected Papers and Organized Symposia; JARE Editor's Report, December 2007; JARE Reviewers, April 1, 2006-October 10, 2007; WAEA 2006 Award Winners; WAEA Past Presidents; WJAE/JARE Past Editors
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December, 2007

Impacts of an Agricultural Development Program for Poor Coconut Producers in the Philippines: An Approach Using Panel Data and Propensity Score Matching Techniques

By: Rodriguez, Divina Gracia P.; Rejesus, Roderick M.; Aragon, Corazono T.
Using panel data econometric techniques and propensity score matching procedures, this study evaluates the impact of the MAUNLAD agricultural development program - a program designed to help alleviate poverty in Philippine coconut-producing communities. Our results indicate that the program had a significant positive mean effect on the recipients' total net farm income. Moreover, the probability of being in poverty is shown to decrease when a poor coconut producer participates in the program. The program's emphasis on training, intercropping, and livestock integration, as well as the more participatory approach taken, contributed to the strong positive impact of the program.
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December, 2007

A Source-Differentiated Analysis of U.S. Meat Demand

By: Mutondo, Joao E.; Henneberry, Shida Rastegari
The Rotterdam model is used to estimate U.S. source-differentiated meat demand. Price and expenditure elasticities indicate that U.S. grain-fed beef and U.S. pork have a competitive advantage in the U.S. beef and pork markets, respectively. Expenditure elasticities reveal that beef from Canada has the most to gain from an expansion in U.S. meat expenditures, followed by ROW pork, U.S. grain-fed beef, and U.S. poultry. BSE outbreaks in Canada and the United States are shown to have small impacts on meat demand, while seasonality is found to have a significant effect in determining U.S. meat consumption patterns.
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December, 2007

A Genetically Engineered Crop’s Impact on Pesticide Use: A Revealed-Preference Index Approach

By: Sydorovych, Olha; Marra, Michele C.
A revealed-preference-based method is proposed for assessment of the environmental and human health impact of genetically engineered (GE) crops. This method employs the relative pesticide toxicity information from farmers' pesticide choices combined with volume of pesticides as an alternative to previous methods which are based on volume only, on number of pesticide applications, or on stated preferences. The method is applied to estimate the changes in the impact of herbicides after environmental and health perspective. The results indicate that, on average, a reduction in herbicide human heath and environmental impacts occurs when farmers adopt RR soybean varieties.
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December, 2007

Hedges and Trees: Incorporating Fire Risk into Optimal Decisions in Forestry Using a No-Arbitrage Approach

By: Insley, Margaret; Lei, Manle
This paper investigates the impact of including the risk of fire in an optimal tree harvesting model at the stand level, assuming timber prices follow a mean-reverting stochastic process. The relevant partial differential equation is derived under different assumptions about hedging the risk of fire. The assumption that fire risk is fully diversifiable is contrasted with the assumption that it can be hedged with another asset. It is conjectured that the risk-neutral probability of fire exceeds the historical probability of fire, which will affect forest land valuation. An empirical example is presented for two different silvicultural regimes.
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