Volume 43, Issue 3, September 2018

September, 2018

Warm Glow, Good Feelings, and Contingent Valuation

By: Bishop, Richard C.
In the contingent valuation (CV) literature, confusion exists about warm glow and embedding effects. I show that i) some writers follow Andreoni’s (1989) definition of warm glow, but others think that subjects answering CV questions load up, free of charge, on “good feelings” from supporting the environment; ii) Andreoni’s warm glow would lead to embedding effects only in extreme circumstances; iii) Andreoni’s warm glow should be counted in valuation studies; and iv) there is scant evidence for good feelings being the source of embedding effects. In fact, embedding effects may not be limited to CV studies.
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September, 2018

Tobacco Education Program Spending and Tobacco Use among Adolescents

By: Galinato, Gregmar; Hong, Yeon A.
This article measures the effect of tobacco education program spending on adolescent tobacco use. We model how corruption influences the policy maker’s decision on subsidies that benefit firms to the detriment of education spending and its differential effect by gender. We estimate the effect of tobacco education program spending, instrumented by our corruption proxy, on adolescent tobacco use. More tobacco education program spending significantly increases the probability of never smoking among all adolescents but reduces the frequency of smoking only among adolescent females. One plausible explanation is that females have a more inelastic marginal utility of health than males.
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September, 2018

Do Regulations to Protect Endangered Species on Private Lands Affect Local Employment? Evidence from the Listing of the Lesser Prairie Chicken

By: Melstrom, Richard T.; Lee, Kangil; Byl, Jacob P.
The U.S. Endangered Species Act is often criticized as “pitting people against wildlife" by conserving habitat at the cost of jobs, but relatively little is known about the labor market effects of listing a species under the Endangered Species Act. We examine changes in employment associated with the lesser prairie chicken, which was listed as threatened in May 2014. Using county-level employment data and variation in suitable prairie chicken habitat, we apply a difference-in-differences strategy to measure the employment effects of the listing decision. We find evidence that employment declined about 1.5% in affected counties. The effect is proportional to habitat, which means counties with relatively more habitat experienced a larger share of employment losses.
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September, 2018

“Look at Me, I’m Buying Organic”: The Effects of Social Pressure on Organic Food Purchases

By: Kim, Seon-Woong; Lusk, Jayson L.; Brorsen, B. Wade
We investigate whether consumers purchase organic foods to demonstrate social status to others. Subjects were asked to choose among organic and nonorganic milk and apples in a control group and treatments in which: i) an image of another person’s eyes was displayed, ii) responses appeared to not be anonymous, or iii) a vignette placed the choice in the presence of an acquaintance. The vignette treatment increased the willingness-to-pay (WTP) premium for organic by about 90%. The other treatments did not have significant overall effects. When exposed to another person’s eyes, more educated respondents increased their WTP for organic.
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September, 2018

Impacts of Expert Information on Prices for an Experience Good across Product Segments: Tasting Notes andWine Prices

By: Chen, Kuan-Ju; McCluskey, Jill J.
When purchasing experience goods, consumers often rely on information from expert evaluations. In this article, we quantify how expert information impacts prices across product segments. For higher-end products, consumers have the incentive to invest more time in research prior to purchase. Thus, expert evaluations should have a greater impact on the price of higher-end segments. We analyze the effects of tasting notes on wine prices across price categories and find that certain keywords used in tasting notes to describe wine characteristics exert a significant influence on wine prices. These effects vary across different segments, with the greatest impact on the premium segment.
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September, 2018

Public Opinion on ColoradoWater Rights Transfers: Are Policy Preferences Consistent with Concerns over Impacts?

By: Stone, Janine; Costanigro, Marco; Goemans, Christopher
We evaluate Coloradans’ preferences for policies decreasing the need for agricultural water transfers using two choice experiments with different frames—one highlighting policy choices and one emphasizing ex post impacts on prices, urban landscaping, and base charges. We find that a majority of users state a willingness to face private costs to reduce agricultural water transfers. Latent-class analysis is used to describe heterogeneity in opinion groups, showing that a minority of urban, lower-income participants would prefer to fallow agricultural land than to pay for alternative policies. This opinion group increases in size in the impact-framed survey.
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September, 2018

The Impact of Agri-Environmental Policies and Production Intensification on the Environmental Performance of Dutch Dairy Farms

By: Skevas, Ioannis; Zhu, Xueqin; Shestalova, Victoria; Emvalomatis, Grigorios
This study examines the impact of policies and intensification on the environmental performance of Dutch dairy farms in the period 2001–2010 using a hyperbolic distance function. The results indicate that the change from the Mineral Accounting System to the combination of the Application Standards Policy with decoupled payments has not significantly changed farms’ hyperbolic efficiency. Farms receiving agri-environmental and animal welfare payments are less hyperbolically efficient than those that do not, highlighting greater decreases in desirable outputs than decreases in undesirable outputs. Finally, intensification increases hyperbolic efficiency, suggesting that intensive practices may increase production without harming the environment.
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September, 2018

Concentration and Liquidity Costs in Emerging Commodity Exchanges

By: Costa, Geraldo Jr.; Trujillo-Barrera, Andres; Pennings, Joost M.E.
We analyze the relationships among liquidity costs, volume, and volatility in the Brazilian agricultural futures market, along with the role of market concentration. We estimate a structural three-equation IV–GMM model using data from Bolsa, Brasil, Balcão corn and live cattle contracts from March 2014 to February 2016. Results show a negative association between liquidity costs and volume and a positive association between liquidity costs and volatility. Market concentration impacts corn and live cattle differently. Concentration contributes to volume reduction for live cattle and to liquidity costs reduction for corn. Our findings shed light on the microstructure of emerging markets.
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September, 2018

Evaluating the USDA’s Net Farm Income Forecast

By: Kuethe, Todd H.; Hubbs, Todd; Sanders, Dwight R.
The USDA produces four forecasts of net farm income for each year; these forecasts are closely monitored by decision makers across the agricultural sector. However, little is known about the performance of these forecasts. Traditional forecast evaluation tests suggest that between 1975 and 2016, the long-horizon forecasts systematically under-predicted realized values. In addition, the shorter-horizon forecast revisions overreact to new information. The findings suggest that forecast users should adjust their expectations and that the USDA may want to consider other forecast approaches to supplement current procedures.
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September, 2018

Should I Stay or Should I Go? A Behavioral Approach to Organizational Choice in Tajikistan’s Agriculture

By: Muller, Malte; Rommel, Jens
Most communist economies were dominated by large collective farms. Today, smaller family farms often coexist with larger corporate and collective farms in these countries. The roles of other-regarding preferences and social norms have been largely neglected in the debate on farmers’ organizational choices. We conducted lab-in-the-field ultimatum game experiments with 397 cotton farmers from collective and family farms. Large and statistically significant differences existed in the rejection behavior among the two farm types. Punishment of unfair behavior explained organizational choice, both with and without controlling for other factors. We conclude that the continuation of dual farm structures requires tailored policy support.
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