Category Archives: Agricultural Economics

Agriculture and AfCFTA: NTM reductions increase intra‐Africa trade

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Abstract

The African Continental Free Trade Area (AfCFTA) is expected to provide trade gains for Africa, especially from reducing non-tariff measures (NTM). Unfortunately, data on NTMs is scarce, both by country and sector. Using three underlying NTM data sets and other data sources, we provide a range of estimates to fill the missing gaps in the existing estimates. Focusing on agriculture, we then use a computable general equilibrium model to estimate the effects of the AfCFTA. Results from all three data sets indicate that NTM reduction leads to much greater intra-Africa trade gains than tariff reduction alone.

Armed conflicts and household food insecurity: Effects and mechanisms

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Abstract

Despite extensive studies on the effects of armed conflict on household dietary diversity, food security, and nutritional outcomes, the underlying pathways remain underexplored. A better understanding of these mechanisms could unpack the subsequent effects of conflict-induced food insecurity and oft-reported nutritional shortcoming, as well as identify which policy interventions hold promise. We study the effects of terrorist violence in Burkina Faso on household dietary diversity, as proxied by food consumption scores (FCS), and investigate the underlying mechanisms. For this purpose, we combine nationally representative 5-years panel data on households with spatial conflict data. We find negative and significant effects of conflict intensity on household food consumption scores. The decline in household FCS is a result of significant decreased dietary diversity in both food production and purchases. Although households in rural areas partially offset these reductions by food assistance, those reliant solely on farming as livelihoods remain the most affected. Further investigations show evidence that per-capita farm income and food expenditure are pathways linking the intensity of armed conflict to reduced FCS in food purchases, whereas reduced dietary diversity in food production results from decline in crop production. Additional specification tests support our main findings, offering insights that can help policymakers faced with similar scaled-armed conflicts. For instance, conflict-sensitive interventions aimed at supporting crop production and farm income for affected households could effectively improve their dietary diversity and overall food security in a post-conflict environment.

The impact of deviations from soybean product crushing estimates on return and risk

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Abstract

This study explores how differences in market yields of soymeal and soyoil, as derived from market prices compared to those obtained through the physical process of crushing soybeans, impact the returns and volatilities of these commodities. Positive (negative) deviations are associated with negative (positive) changes in return. Additionally, these deviations positively correlate with return volatility, suggesting that variations from the expected yields lead to price shifts and heightened return volatility. In summary, deviations from the crushing estimates significantly shape the modeling of soybean commodity returns and volatilities, with implications for understanding returns, hedging ratios, and portfolio return variance.

Europe’s ambitious pesticide policy and its impact on agriculture and food systems

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Abstract

European countries have set ambitious policy goals to reduce the risks of pesticides to the environment and human health. European agriculture could play a leading role in the transition to a low pesticide risk future, with various societal benefits. However, such a transition also involves trade-offs, costs, and risks for farmers and society. Here, we summarize possible implications for agriculture and food systems in Europe and beyond and discuss avenues for future research.

Machinery structure, machinery subsidies, and agricultural productivity: Evidence from China

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Abstract

Although agricultural machinery is indispensable for modern agriculture, the effect of machinery structure on food production is rarely scrutinized. Machinery structure, referring to the proportion of high-capacity machines which are represented by tractors with relatively high horsepower, is used to measure the scale of agricultural machinery. In response, this article investigates how agricultural machinery structurally impacts grain production theoretically and empirically, with particular emphasis on the effects of capacity structure and subsidy policy. The article estimates a Translog production function with a panel dataset covering 126 counties across Xinjiang and Hubei provinces in China from 2002 to 2012. Though we find the general elasticity of output with respect to machinery inputs is .03, the capacity structure of agricultural machines could impact agricultural production by inducing the reallocation of other input factors. Along with the upsizing of farming machines, we observe the complementarity between machinery horsepower and land inputs in production increases, while the joint effect of machinery and fertilizer decreases. The positive land channel is found in areas with fewer high-capacity machines, while the negative fertilizer channel occurs when there are more large machines.

Does it matter how we ship the good apples out? On specific tariffs, transport modes, and agricultural export prices

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Abstract

Free-on-board (FOB) export prices for identical products from the same origin often differ across destinations, even when accounting for the trade costs and attributes of the destination country. One explanation for this observed price difference is per-unit trade costs, and the ability of exporters to vary their markups and/or product quality. Using a novel dataset that details trade flows between countries by mode of transport, we estimate the transport mode-specific effect of a per-unit trade cost, specifically specific tariffs, on the FOB export prices of agricultural products. We find an elasticity of specific tariffs to export prices of 1.8%. However, the estimates are heterogeneous across modes of transport. The elasticity of specific tariffs to export prices is 2% for air transport, 5% for road transport, and  .3% for sea cargo. Since the observed positive export price effect can reflect product quality differences or markups, we account for the quality element and find that for a given product quality, markups increase with increasing specific tariffs. This form of price discrimination is less pronounced for higher-quality products that are predominantly shipped by air.

The direct and indirect effects of cash transfer program on the consumption of nutrients: Evidence from Kenya

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Abstract

How does the receipt of a cash transfer impact consumption of nutrients, vitamins, and minerals in households? To answer this question, we use a randomized controlled trial dataset from Hunger Safety Net Program (HSNP) with 9,246 households spread across the four districts (Turkana, Marsabit, Wajir, and Mandera) of Kenya. In the experiment, HSNP treated households received a bi-monthly cash transfer of about United States of America Dollar (USD) 20 relative to households in control sub-locations. Using difference in-difference specification, we find that HSNP poor beneficiary households in treated households increased (by approximately 96%, 50%, and 61%) the consumption of vitamins A, C, and beta carotene, respectively compared to those in control sub-locations. Moreover, HSNP non-poor, non-beneficiary households residing in treated sub-locations increased (by about 70% and 46%) the consumption of vitamin A and Beta carotene, respectively compared to those in control sub-locations. In addition, HSNP-poor beneficiary households in treated sub-locations sourced most of their nutrients, vitamins, and minerals from the market. We rule out alternative pathways that could potentially increase consumption and conclude that a rise in consumption amongst HSNP non-poor, non-beneficiary households is due to sharing of HSNP transfer amongst social network members.

Investigating the economic impact of climate change on agriculture in Iran: Spatial spillovers matter

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Abstract

In this study, we enhance our understanding of the economic impacts of climate change on agriculture in Iran to provide further information for moving Iran's climate policy forward by linking farmland net revenue to novel climatic and non-climatic variables. We take advantage of spatial panel econometrics to better circumvent omitted factors extraneous to the agricultural sector and to develop a more reliable and consistent model when data are inherently spatial. In contrast to conventional panel studies which relied on year-to-year weather observations, we exploit a hybrid approach to compromise between the disadvantages and advantages of longer-term cross-sectional analysis and shorter-term panel models. We estimate the potential impacts of climate change on agriculture under several global warming scenarios based on the Sixth Phase of the Coupled Model Intercomparison Project (CMIP6). We find that (I) farmlands’ net revenues are projected to decline by 8%–19% and 14%–51% by 2050 and 2080; (II) the distributional impacts of climate change would highly depend on climate zones and geographical locations; (III) a few counties might benefit from climate changes; (IV) finally, failing to account for spatial spillovers when they are present leads to a misspecified model.

National and subnational regulation of farm practices for consumer products sold within a jurisdiction: California’s Proposition 12

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Abstract

This article studies the economic effects of regulations that restrict farm practices used to produce products sold within a regulating jurisdiction, regardless of where the product was produced. We apply this analysis to the impact of California's law on sow housing and the North American hog/pork supply chain. California's Proposition 12 requires that specified pork products sold in California come from hogs whose mothers were housed according to California requirements. Such regulations, whether imposed by national or subnational authorities, have unique impacts on production, demand, prices, and economic welfare both within and outside the regulating jurisdiction. Our model identifies these effects and quantifies their impacts within a calibrated equilibrium framework. Results show that California consumers will buy less pork under Proposition 12 because retail prices of regulated cuts of pork will rise by about 7%. Compliant hog producers will, on average, earn greater profits, while impacts on prices and quantities of products sold outside of California are minimal. Regulations like Proposition 12 are especially costly ways to affect farm animal treatment because they impose costs throughout the supply chain. We consider a simple alternative policy that would achieve far more change in animal housing at lower cost.