Volume 46, Issue 1, January 2021

January, 2021

Product Quality in Food and Agricultural Trade: Firm Heterogeneity and the Impact of Trade Costs

By: Eun, Jihyun ; Sheldon, Ian ; Thompson, Stanley R.
We develop a heterogeneous firm model that allows us to identify the relationship between firm productivity and product quality. The model is used to analyze the impact of trade costs on food and agricultural trade based on a bilateral trade dataset covering 159 countries over the period 2010--2013. The results show that a high firm capability cutoff---implying an ability to produce high quality---limits export market entry. In addition, fixed and variable trade costs have a negative and significant impact on the probability of firms entering export markets, while variable trade costs have a negative and significant effect on firms' export levels.
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January, 2021

Long-Term Scenarios for Sub-Saharan AfricaÕs Agro-Food Markets with Varying Population, Income, and Crop Productivity Trends

By: Kuhn, Arnim ; Britz, Wolfgang
This study develops long-term scenarios combining trends in population numbers, incomes, and crop productivity for Sub-Saharan Africa (SSA) up to 2050 by using a recursive-dynamic version of the GTAP general equilibrium model. Results suggest that crop productivity will have a major impact on cropland expansion in SSA, giving potentially available cropland the role of a buffer that could smooth differences between future production outcomes. Another inherent smoothing factor will be countervailing trends in population and income growth that will diminish future differences in food commodity consumption per capita and limit the impact of African trends in the rest of the world.
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January, 2021

Revisiting Sugar Taxes and Sugary Drink Consumption: Evidence from the Random-Coefficient Demand Model

By: Zhang, Yinjunjie ; Palma, Marco A.
Berkeley's sugar tax policy is currently under intense scrutiny and debate, while similar tax policies are rapidly expanding to other U.S. states. Contrary to theoretical predictions and policy expectations, previous literature documents short-term evidence of increased consumption of sugary drinks in response to a sugar tax policy. We investigate the underlying mechanism behind this behavioral anomaly using the Berry, Levinsohn, and Pakes (BLP) random coefficient (RC) logit demand model in characteristic space. We find that the consumption increase is mainly driven by a change in the average valuation of the sugar content going from negative to positive following enactment of the sugar tax policy.
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January, 2021

Are Cattle Genetics Priced to Reflect Carcass Value?

By: Worley, Julian ; Dorfman, Jeffrey H. ; Russell, Levi A.
The impact of breed on carcass characteristics in various breeds of cattle has been well documented. This paper attaches these differences in breed characteristics to end revenue via different breed and breed combinations, percentage of Angus in pedigree, and purebred status. We find that while the genetics of many breeds is priced roughly in line with its value, some breeds are overpriced or underpriced by enough to significantly improve a cattle operation's profitability. We find that, relative to a pure Angus base, most breeds are less profitable in terms of carcass revenue per hundredweight.
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January, 2021

Origin and Export Basis Interdependencies with Shipping Costs in Soybeans: A Panel Data Analysis

By: Lakkakula, Prithviraj; Wilson, William
Forward pricing and allocation mechanisms for rail transportation serve critical functions for the grain-marketing system. We examine the effects of shipping costs on the origin and export basis using a panel simultaneous-equations model. Results indicate that the origin and export basis are determined simultaneously, with each one affected by the dynamic variability of shipping costs. On average, a $1 increase for the shipping costs decreases the origin basis by $0.19 and increases the export basis by $0.82/bu of soybeans. The interaction between shipping cost and exports on the export basis impacts both marketing and trading strategies in the grain-marketing system.
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January, 2021

Design of the Rainfall Index Crop Insurance Program for Pasture, Rangeland, and Forage

By: Cho, Whoi ; Brorsen, B. Wade
This article considers three possible issues about the design of the Rainfall Index Pasture, Rangeland and Forage (RI-PRF) crop insurance program: (i) how well the rainfall index matches actual rainfall, (ii) whether the county base values can be made more accurate using spatial smoothing, and (iii) optimal choices of RI-PRF crop insurance alternatives for producers and reducing the number of choices that producers have to make. Based on the results, we conclude that the RI-PRF crop insurance program needs to reduce the number of choices and provide suggestions for restricting the choices.
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January, 2021

On the Changing Nature of Canadian Crop Yield Distributions

By: Ng, Horlick ; Ker, Alan P.
Although there is significant literature on technological change in U.S. crop yields, very little has been done with Canadian yields. We model the changing nature of county-level yields for barley, canola, corn, oats, soybean, and wheat in Canada. We use mixtures to allow and test for heterogeneous rates of technological change within the yield-data-generating process. While we tend to find increasing but heterogeneous rates of technological change, increasing and asymmetric yield volatility, and increasing absolute but decreasing relative yield resiliency, our results differ across crops and exhibit spatial bifurcations within a crop. Using a standard attribution model, we find changing climate has differing effects across crops.
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January, 2021

On Misrepresentation of Altruistic Preferences in Discrete-Choice Experiments

By: Johansson, Per-Olov ; Kristršm, Bengt
The purpose of this note is to address a problem faced in using stated preference methods to estimate willingness to pay (WTP) for a project. The considered problem occurs under pure altruism. Even though an agent is equipped with well-behaved preferences, a conventional closed-ended (binary) valuation question may induce her to overrate or underrate her true WTP. On the other hand, an open-ended valuation format seemingly provides a correct answer, but such a format fails to be incentive compatible.
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January, 2021

Provision Point Reverse Auction: A New Auction Mechanism with Applications for Conservation Contracts

By: Otto, Steven ; Poe, Gregory ; Just, David
Rent-seeking behavior in payment for environmental services auctions reduces the number of affordable contracts and decreases environmental protection. We propose a new auction mechanism, the provision point reverse auction (PPRA), to mitigate this behavior. The PPRA includes a public component in which the probability of contract acceptance for one individual is affected by the sum of the other accepted offers. We provide theoretical support for the new mechanism and follow with laboratory experiments. The experiments yield average offers that are 12.57%--58.17% smaller than in alternate reverse discriminative auctions, with the exact difference dependent on the compared mechanism and auction parameters.
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January, 2021

Geographic Distribution of Commercial Fishing Landings and Port Consolidation following ITQ Implementation

By: Speir, Cameron ; Lee, Min-Yang
We evaluate whether changes in geographic distribution of landings coincided with implementation of individual transferable quotas (ITQs) in the limited-entry groundfish trawl fishery on the U.S. Pacific coast. We use a spatial Theil index, kernel density functions of port revenue share, and Shorrocks index of intradistributional mobility to measure changes in spatial distribution. We find evidence of increased spatial concentration; however, this appears consistent with preexisting trends and not related to ITQs. Further, we find a high degree of intradistributional mobility in the revenue share of ports that coincided with ITQ implementation.
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