Volume 37, Issue 2, August 2012

By: Richards, Timothy J.; Hamilton, Stephen F.
Models of rational addiction suggest that obesity is consistent with time-consistent preferences. Behavioral economists maintain that addictions such as alcoholism, smoking and over-eating represent examples of present-bias in decision making that is fundamentally irrational. In this article, conduct an experiment to test whether individual discount schedules are time-consistent and whether discount rates are higher for subjects who exhibit patterns of risky behavior. Our results show that discount functions are quasi-hyperbolic in shape, and that obesity and drinking are positively related to the discount rate. Anti-obesity policy, therefore, would be best directed to informing individuals as to the long-term implications of short-term gratification, rather than taxing foods directly
By: Vyn, Richard J.; Haq, Zahoor Ul; Weerahewa, Jeevika; Meilke, Karl D.
This study estimates the impact of changes in market returns and government payments on farmland values across Canada using data from 1959 to 2009. A recursive simultaneous equation model is estimated to account for the counter-cyclical relationship between market returns and government payments. The results indicate that farmland values are more responsive to changes in market returns than in government payments, but both are important drivers of land values. The elasticity of land values with respect to government payments is lower than has been observed in the United States. In addition, the partial decoupling of government payments has not reduced their impact on farmland values.
By: Schnake, Kristin N.; Karali, Berna; Dorfman, Jeffrey H.
Futures markets have two main goals: price discovery and risk management. Because management decisions often have to be made on a time horizon longer than the time until expiration of the nearby futures contract, it is important to determine how well distant-delivery futures contracts are able to assist in price discovery. We focus on soybean and live cattle distant-delivery futures contracts and test for the informational value added to nearby contracts. Two tests for information value provide partially conflicting results due to the different information measures employed. If being able to predict the price trend is sufficient, then we find some information value in distantdelivery futures contracts, while if accurate point estimates of future spot prices are desired the results are negative. Surprisingly, we do not find the expected dichotomy between the storable (soybeans) and non-storable (cattle) commodities.
By: Colino, Evelyn V.; Irwin, Scott H.; Garcia, Philip; Etienne, Xiaoli
This paper investigates whether the accuracy of outlook hog price forecasts can be improved using composite forecasts in an out-of-sample context. Price forecasts from four widely-recognized outlook programs are combined with futures-based forecasts, ARMA, and unrestricted Vector Autoregressive (VAR) models. Quarterly data are available from 1975.I through 2007.IV for Illinois/Purdue and 1975.I-2010.IV for Iowa, Missouri, and USDA forecasts, which allow for a relatively long out-of-sample evaluation after permitting model specification and appropriate composite-weight training periods. Results show that futures and numerous composite procedures outperform outlook forecasts, but no-change forecasts are inferior to outlook forecasts. At intermediate horizons, OLS composite procedures perform well. The superiority of futures and composite forecasts decreases at longer horizons except for an equal-weighted approach. Importantly, with few exceptions, nothing outperforms the equal-weight approach significantly in any program or horizon. In addition, the equal-weight approach as well as other composite approaches can generally produce larger trading profits compared to outlook forecasts. Overall, findings favor the use of equal-weighted composites, consistent with previous empirical findings and recent theoretical papers.
By: Trujillo-Barrera, Andres; Mallory, Mindy L.; Garcia, Philip
This article analyzes recent volatility spillovers in the United States from crude oil using futures prices. Crude oil spillovers to both corn and ethanol markets are somewhat similar in timing and magnitude, but moderately stronger to the ethanol market. The shares of corn and ethanol price variability directly attributed to volatility in the crude oil market are generally between 10%- 20%, but reached nearly 45% during the financial crisis, when world demand for oil changed dramatically. Volatility transmission is also found from the corn to the ethanol market, but not the opposite. The findings provide insights into the extent of volatility linkages among energy and agricultural markets in a period characterized by strong price variability and significant production of corn-based ethanol.
By: Yu, Li; Hurley, Terrance M.; Kliebenstein, James B.; Orazem, Peter F.
This study investigates worker shares of the returns to scale and returns to technology adoption on U.S. hog farms. The wage analysis controls for a matching process by which workers are linked to farms of different sizes and technology uses. Using four surveys of employees on hog farms collected in 1990, 1995, 2000, and 2005, we find persistent large wage premiums are paid to workers on larger farms and on technologically advanced farms that remain large and statistically significant even after controlling for differences in observable worker attributes and in the observed sorting process of workers across farms.
By: Nastis, Stefanos A.; Papanagiotou, Evangelos; Zamanidis, Savvas
This paper assesses the efficiency and performance of organic alfalfa farms. Data were obtained from questionnaires collected from forty farms participating in an EU-subsidized program promoting the switch to organic farming. Results obtained using the bootstrap Data Envelopment Analysis methodology show that larger farms had lower yields and lower efficiency scores and more experienced farmers had higher efficiency scores. A Tobit analysis of the impact of environmental factors and subsidies on farm efficiency demonstrates that CAP subsidies cause perverse incentives, raising questions about the efficiency of such policies for sustainable agricultural development.
By: Kim, GwanSeon; Petrolia, Daniel R.; Interis, Matthew G.
This paper introduces an alternative non-market value elicitation method—the “quasi-doublereferendum” (QDR)—applied to barrier island restoration in Mississippi. It is appropriate for surveys that elicit willingness-to-pay responses to multiple projects differing in scale only and can be used to increase efficiency while mitigating bias. We compare results to the more commonly used single-referendum (SR) method under two admissible ranges of willingness to pay: negative to positive infinity, and zero to income. The confidence intervals of the QDR models were narrower. We argue that the QDR approach should be less subject to bias than the commonly used double-referendum approach.
By: Walters, Cory G.; Shumway, C. Richard; Chouinard, Hayley H.; Wandschneider, Philip R.
Government programs that help agricultural producers manage risk may have environmental consequences. In recent years, premium subsidies for crop insurance have been increased substantially to encourage greater producer participation. Using detailed, producer-level crop insurance contract data in four regions, we investigate whether adverse environmental effects have resulted from these increased subsidies. We find some association between environmental effects and insurance contracts. On average, however, we find that environmental effects are generally small and as often beneficial as adverse. More importantly, we find that results are specific to local conditions and to particular environmental indicators and may be hidden in aggregate analysis.
By: Wong, Linda; van Kooten, G. Cornelis; Clarke, Judith A.
Because there are potential externality benefits, it is important to specify an appropriate statistical model when analyzing the conflict between agriculture and migratory waterfowl in Canada’s pothole region. Unlike non-spatial panel models, our use of a spatial autoregressive panel model identifies indirect impacts of agricultural activities on wetlands and waterfowl. In particular, we find that programs to restore wetlands in one location will result in enhanced duck productivity of wetlands and habitat in other locations within the study region. Even so, costs of protecting ducks could range from $107 to $204 per bird.