2014

August, 2014

Partial versus General Equilibrium Calorie and Revenue Effects Associated with a Sugar-Sweetened Beverage Tax

By: Dharmasena, Senarath; Davis, George; Capps, Oral, Jr.
Taxes on sugar-sweetened beverages have been widely proposed to combat the U.S. obesity crisis. Most previous work has found the effects of a SSB tax to be small to moderate. We address three limitations. First, we incorporate the supply side via a stochastic equilibrium displacement model. Second, we account for uncertainty elasticities using probability distributions associated with elasticities. Third, we address industry revenue effects. We find that assumptions about the supply side are more important than assumptions about substitution. ignoring supply side severely overestimates quantity and calorie effects and slightly underestimated revenue effects.
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August, 2014

Beer Snobs Do Exist: Estimation of Beer Demand by Type

By: Toro-Gonzalez, Daniel; McCluskey, Jill J.; Mittelhammer, Ron
Although mass-produced beers still represent the vast majority of U.S. beer sales, there has been a significant growth trend in the craft beer segment. This study analyzes the demand for beer as a differentiated product and estimates own-price, cross-price, and income elasticities for beer by type: craft beer, mass-produced beer, and imported beer. We verify that beer is a normal good with a considerably inelastic demand and also find that the cross-price elasticity across types of beer is close to zero. The results suggest that there are effectively separate markets for beer by type.
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August, 2014

On the Endogeneity of Retail Markups in an Equilibrium Analysis: A Control-Function Approach

By: Hovhannisyan, Vardges; Stiegert, Kyle; Bozic, Marin
The endogeneity of retail markups arises due to the correlation between the markups and unobserved costs in the retail pricing equation. This correlations may be a result unobserved product quality affecting both price and markups. Despite inconsistency resulting from markup endogeneity, it has long been ignored in the equilibrium analysis of retail behavior. We account for retail markup endogeneity using a control-function approach in which controls are derived from empirical evidence in the marketing literature. Furthermore, we adopt three test procedures to evaluate this endogeneity and apply our method in an econometric analysis of retail market behavior in the marketing of yogurt in the United States. The results provide strong statistical evidence for the fact that markup endogeneity has been overlooked, resulting in upward bias in retail markups.
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August, 2014

The Effects of Consequentiality in Binary- and Multinomial-Choice Surveys

By: Interis, Matthew; Petrolia, Daniel
We examine the effect of respondent of consequentiality on a split-sample binary-choice/multinomial-choice stated-preference survey. We fail to observe the knife-edge results predicted in the consequentiality literature in the binary-choice data but do observe them in the multinomial-choice data. In the multinomial-choice data, only respondents who believed the survey was at least somewhat likely to affect future policy behaved consistently with theoretical predictions. Overall, we conclude that failing to control for perceived consequentiality can lead to false conclusions regarding marginal effects and welfare estimates. This is true in both the binary- and multinomial-choice contexts.
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August, 2014

Structural Change in Forward Contracting Costs for Kansas Wheat

By: Taylor, Mykel; Tonsor, Glynn; Dhuyvetter, Kevin
Farmers use forward contracts to eliminate adverse price and basis movements prior to harvest. Since late 2007, the local basis for Kansas wheat has changed dramatically relative to historic levels, causing greater risk exposure for elevators offering forward contracts. The result has been an increase in the cost of forward contracting paid by farmers from $0.086 per bushel to $0.327 per bushel. The factors driving this increase in costs are basis volatility, wheat futures harvest price, the information available in the market as harvest approaches, and realized returns to the elevator from forward contracting in previous years.
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August, 2014

Estimating the Spatially Varying Responses of Corn Yields toWeather Variations using GeographicallyWeighted Panel Regression

By: Cai, Ruohong; Yu, Danlin; Oppenheimer, Michael
Researchers have extensively studied crop yield response to weather variations, while only a limited number of studies have attempted to identify spatial heterogeneity in this relationship. We explore spatial heterogeneity in corn yield response to weather by combining geographically weighted regression and panel regression. We find that temperature tends to have negative effects on U.S. corn yields in warmer regions and positive effects in cooler regions, with spatial heterogeneity at a fine scale. The spatial pattern of precipitation effects is more complicated. A further analysis shows that precipitation effects are sensitive to the existence of irrigation systems.
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August, 2014

Exploiting the Relationship between Farm-Level Yields and County-Level Yields for Applied Analysis

By: Gerlt, Scott; Thompson, Wyatt; Miller, Douglas
County-level yield data are used in applied research and crop insurance policy in place of farmlevel yield data, which are likely sparse, not broadly representative, and subject to selection bias. We exploit the fact that county-level yields are the aggregate of farm-level yields to derive bounds that can be reduced to direct relationships between county- and farm-level yields under certain conditions. Simulation experiments indicate that crop insurance premium estimates derived from this method have the potential for bias in certain conditions but are reasonably precise in other conditions, suggesting that these relationships are a new tool for applied analysts.
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August, 2014

Optimal Control for a Dispersing Biological Agent

By: Chalak, Morteza
A bioeconomic model is developed to analyze the optimal control management strategies for an introduced herbivore in a two-compartment ecosystem. This paper analyzes cost-effective control strategies that decrease the spillover effects of the herbivore on endangered plant species, thereby reducing extinction pressure and increasing benefits. The optimal level of control is presented in different circumstances. The level of optimal control is high if the herbivore has a relatively low attack rate on the target species, the nontarget host has a high biodiversity value, or the costs of controlling the herbivore are low.
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August, 2014

Corrigendum to “Adoption and Frequency of Precision Soil Testing in Cotton Production”

By: Lambert, Dayton M.; English, Burton; Harper, David; Larkin, Sherry L.; Laron, James; Mooney, Daniel F.; Roberts, Roland; Velandia, Margarita; Reeves, Jeanne
The authors regret that the above paper contained an error in the calculation of the survey expansion weights (Lambert et al., 2014, p. 110). Using the notation of the paper, the expansion factor for the lth stratum was introduced as wl =agbh=ngh, where g indexes states and h indexes farm size class. This is in fact the correct expression if Sinkhorn’s (1964) RAS method were used. However, Ireland and Kullback’s (1968) cross-entropy method was used to estimate the expansion factors, and division of variables a and b by the survey response frequency (ngh) is unnecessary. The typographical error has no bearing on the empirical analysis. References
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April, 2014

Wetlands Retention and Optimal Management of Waterfowl Habitat under Climate Change

By: Withey, Patrick; van Kooten, G. Cornelis
We develop a positive mathematical programming model to investigate the impact of climate change on land use in the prairie pothole region of western Canada, with particular focus on wetlands retention. We examine the effect of climate change and biofuel policies that are implemented to mitigate climate change on wetlands retention. Simulation results indicate that a drier climate could decrease wetlands by as much as 38% if the externality benefits of wetlands are considered, but by nearly 80% if they are not. Reductions in wetlands are most pronounced in the south-central areas of the region.
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April, 2014

Reference-Dependent Preferences in Gulf of Mexico Shrimpers’ Fishing Effort Decision

By: Ran, Tao; Keithly, Walter R., Jr.; Yue, Chengyan
This paper provides empirical evidence that reference-dependent preferences help to explain the amount of effort exerted by shrimpers in the Gulf of Mexico. Using survival analysis, the authors find that shrimpers tend to prolong their trip when their current trip revenue goal remains unattained. Furthermore, this tendency became more pronounced after 2001 in association with a significant decline in the shrimp price. This may partially explain the less obvious decrease in fleet effort vis-à-vis sharp decline in fleet size following the price change.
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April, 2014

2013WAEA Keynote Address: Strategies for Overcoming Hypothetical Bias in Stated Preference Surveys

By: Loomis, John B.
In some, but not all, contexts, respondents to stated preference valuation studies state a willingness to pay (WTP) higher than what lab or field experiments indicate is the actual amount they would pay. However, several ex ante survey design strategies and ex post calibration techniques can be used to minimize or eliminate hypothetical bias. This article reviews and presents evidence on the effectiveness of these ex ante and ex post approaches. The ex ante approaches lead to recommendations to modify survey designs to minimize the bias up front. If the analyst desires, ex post calibration of WTP using certainty scales can be used to reduce stated WTP to the point at which it will match actual cash contributions.
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April, 2014

Association between Total Diet Cost and Diet Quality Is Limited

By: Carlson, Andrea; Dong, Diansheng; Lino, Mark
There is a common perception that it costs more to eat a healthy diet than a less healthy one. We derive a panel data model that accounts for unobserved specific individual effects to estimate the relationship between diet quality and total daily food expenditure. Since total daily diet cost and diet quality are both calculated from the foods chosen in our data, we account for the fact that there is an endogenous relationship between diet quality and cost. We find that while total daily food expenditure is statistically significant in relation to diet quality, the degree of association is very small.
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April, 2014

Does Agritourism Enhance Farm Profitability?

By: Schilling, Brian J.; Attavanich, Witsanu; Jin, Yanhong
The impacts of agritourism on farm profitability are poorly understood. Using Census of Agriculture records, we employ propensity score matching to estimate the effects of agritourism on the net cash income per acre of New Jersey farms. We find that agritourism has statistically significant and positive effects on farm profitability. Profit impacts are highest among small farms operated by individuals primarily engaged in farming. Positive but smaller effects are observed for lifestyle farms. Profit effects among larger farms are not statistically significant.
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April, 2014

The Value of USDA Crop Progress and Condition Information: Reactions of Corn and Soybean Futures Markets

By: Lehecka, Georg V.
This paper investigates the informational value of USDA crop progress and condition information by analyzing reactions of corn and soybean futures markets from 1986 to 2012. Results show significant differences between close-to-open return variabilities on report-release trading days and pre- and postreport days. Additionally, market prices tend to react rapidly and rationally to new crop-condition information. Strongest reactions are found for July and August, when weather conditions are most critical for the crop, and reactions have increased over time. Overall, these results suggest that reports have substantial informational value.
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April, 2014

Adoption and Frequency of Precision Soil Testing in Cotton Production

By: Lambert, Dayton M.; English, Burton C.; Harper, David C.; Larkin, Sherry L.; Larson, James A.; Mooney, Daniel F.; Roberts, Roland K.; Velandia, Margarita; Reeves, Jeanne M.
A 2009 survey of cotton farmers in twelve states collected information about the use of georeferenced precision soil testing (PST). Adoption of PST technology and the interval until retesting were examined with a Poisson hurdle regression. Survey data were calibrated using a post-stratification weighting protocol. Farming experience, farm size, land ownership, variable rate fertilizer management plans, and the use of soil electrical conductivity devices were correlated the with period until PST adopters retested soil. Understanding how producers perceive the useful life of soil-test information may be important for monitoring the effectiveness of best nutrient management practice adoption.
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April, 2014

Reducing Self-Selection Bias in Feeder Cattle Premium Estimates Using Matched Sampling

By: Williams, Brian R.; DeVuyst, Eric A.; Peel, Derrell S.; Raper, Kellie Curry
Past value-added research employs hedonic pricing models to estimate premiums associated with value-added feeder cattle characteristics. However, hedonic pricing models require restrictive assumptions and impose a functional form. Producers also self-select into a treatment group, potentially biasing estimates. Using propensity score matching, we reduce potential bias from producer self-selection and from imposing a functional form. Results suggest that hedonic pricing models may be negatively biased in estimates of premiums received by value-added calf producers. Current adopters receive a premium of $5.38/cwt from participation in a certified preconditioning program, while nonadopters would realize $5.17/cwt by adopting certification. Hedonic model values range from $0.52/cwt to $4.32/cwt, for similar or identical preconditioning programs.
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