A Model of Producer Incentives for Livestock Disease Management

We examine the management of livestock diseases from the producers' perspective, incorporating information and incentive asymmetries between producers and regulators. Using a dynamic model, we examine responses to different policy options including indemnity payments, subsidies to report at-risk animals, monitoring, and regulatory approaches to decreasing infection risks when perverse incentives and multiple policies interact. This conceptual analysis illustrates the importance of designing efficient combinations of regulatory and incentive-based policies.livestock disease, asymmetric information, reporting, indemnities, risk management, Livestock Production/Industries, C61, D82, Q12, Q18, Q28,

The 1996 Federal Agriculture Improvement and Reform Act: Correcting a Distortion?

This study makes use of farm-level data from the Agricultural Census to evaluate the effects of the 1996 Federal Agriculture Improvement and Reform (FAIR) Act, which intended to "decouple" commodity payments from production decisions. Prior to this Act, agricultural support payments were linked to production decisions via prices and a complex set of restrictions that acted to control the supply of agricultural commodities. We compare farm-level 1992-to-1997 changes in commodity crop plantings of farms that participated in government programs with farms that did not participate. We find that the growth rate of program-crop acreage of non-participants was 19 percentage points below that of participants. This estimated difference remains unchanged after we account for unobserved effects relating to farm size, type, location, and interactions of these factors using over 1900 fixed-effects variables. These results may imply that program participation rules associated with pre-1996 programs effectively acted to limit program acreage in 1992. An alternative explanation is that payments associated with decoupled programs instituted with the 1996 Act were in fact distortionary and induced farmers to produce more than they would have without the payments. Additional research would be needed to test these competing theories.Agricultural and Food Policy,

What Drives Land-Use Change in the United States? A National Analysis of Landowner Decisions

Land-use changes involve important economic and environmental effects with implications for international trade, global climate change, wildlife, and other policy issues. We use an econometric model to identify factors driving land-use change in the United States between 1982 and 1997. We quantify the effects of net returns to alternative land uses on private landowners’ decisions to allocate land among six major uses, drawing on detailed micro-data on land use and land quality that are comprehensive of the contiguous U.S. This analysis provides the first evidence of the relative historical importance of markets and Federal farm policies affecting land-use changes nationally.Land Use, Land-Use Change, Econometric Analysis, Simulations

Extent, Location, and Characteristics of Land Cropped Due to Insurance Subsidies

We examine changes in land use caused by the large increase in crop insurance premium subsidies under the 1994 Federal Crop Insurance and Reform Act (FCIRA). We use a conditional logit model to estimate changes in six major land uses from 1992 and 1997 as a function of the change in expected return to crop insurance. Our data on individual land parcels across the entire coterminous United States enable identification of the extent, location, and physical characteristics of the land brought into and retained in production as a result of the crop insurance policies. Results indicate the additional crop insurance premium subsidies increased cultivated cropland area on the order of 1.9 million acres (0.6%), consistent with the lower range of previous estimates of crop insurance acreage effects. The estimated lands in production due to the subsidy increases are of lower quality than cropland overall in term of both Land Capability Classification and proneness to flooding, as well as more environmentally sensitive in terms of erodibility and proportion in wetlands.Land Economics/Use,

What drives land-use change in the United States? A national analysis of landowner decisions

Land-use changes involve important economic and environmental effects with implications for international trade, global climate change, wildlife, and other policy issues. We use an econometric model to identify factors driving land-use change in the United States between 1982 and 1997. We quantify the effects of net returns to alternative land uses on private landowners' decisions to allocate land among six major uses, drawing on detailed micro-data on land use and land quality that are comprehensive of the contiguous U.S. This analysis provides the first evidence of the relative historical importance of markets and Federal farm policies affecting land-use changes nationally

Prevention or Control: Optimal Government Policies for Invasive Species Management

We present a conceptual, but empirically applicable, model for determining the optimal allocation of resources between exclusion and control activities for managing an invasive species with an uncertain discovery time. This model is used to investigate how to allocate limited resources between activities before and after the first discovery of an invasive species and the effects of the characteristics of an invasive species on limited resource allocation. The optimality conditions show that it is economically efficient to spend a larger share of outlays for exclusion activities before, rather than after, a species is first discovered, up to a threshold point. We also find that, after discovery, more exclusionary measures and fewer control measures are optimal, when the pest population is less than a threshold. As the pest population increases beyond this threshold, the exclusionary measures are no longer optimal. Finally, a comparative dynamic analysis indicates that the efficient level of total expenditures on preventive and control measures decreases with the level of the invasive species stock and increases with the intrinsic population growth rate, the rate of additional discoveries avoided, and the maximum possible pest population.invasive species, exclusion, control, eradication, public expenditures, Environmental Economics and Policy, Resource /Energy Economics and Policy,

Biological Invasions: The Case of Soybean Aphid Infestation

Soybeans, the second highest cash crop following corn in the U.S., have come under attack by invasive species, the soybean aphid from the North and soybean rust from the South. We estimated the economic losses resulting from soybean aphid infestation by using a dynamic equilibrium model. Results indicate that, first, the reduction of soybean production resulting from soybean aphid infestation is largely absorbed by reducing soybean exports, due to the higher price elasticity of export demand compared to the domestic demand. Second, the economic losses to U.S. soybean producers would grow on average annually between $12.8 million and$23.4 million during the first five years of infestation. In the longer-run, soybean producers would suffer greater economic losses as the dispersion rate of infested soybean acreage with soybean aphids rises. However, the successful discovery of the soybean aphid gene (TF04048) Rag-1 (which confers resistance) does not at this time warrant soybean growers and policy-makers becoming too seriously alarmed. Even so, time is an important factor in the eventual control of the soybean aphid.Crop Production/Industries,

The effects of potential land development on agricultural land prices

We conduct a national-scale study of the determinants of agricultural land values to better understand how current farmland prices are influenced by the potential for future land development. The theoretical basis for the empirical analysis is a spatial city model with stochastic returns to future land development. From the theoretical model, we derive an expression for the current price of agricultural land in terms of annual returns to agricultural production, the price of recently developed land parcels, and expressions involving model parameters that are represented in the empirical model by nonlinear functions of observed variables and parameters to be estimated. We estimate the model of agricultural land values with a cross-section on approximately three thousand counties in the contiguous U.S. The results provide strong support for the model, and provide the first evidence that option values associated with irreversible and uncertain land development are capitalized into current farmland values. The empirical model is specified in a way that allows us to identify the contributions to land values of rents from near-term agricultural use and rents from potential development in the future. For each county in the contiguous U.S., we estimate the share of the current land value attributable to future development rents. These results give a clearer indication of the magnitude of land development pressures and yield insights into policies to preserve farmland and associated environmental benefits

Economic Impacts of the U.S. Soybean Aphid Infestation: A Multi-Regional Competitive Dynamic Analysis

We estimated the economic benefits resulting from controlling soybean aphid infestation by using a multi-regional competitive dynamic equilibrium model. Results indicate that the reduction of soybean production resulting from a soybean aphid infestation is largely absorbed by reducing soybean exports, due to the higher price elasticity of export demand compared to domestic demand. Producer benefits resulting from controlling soybean aphids would increase by between $949 million and$1.623 billion in ten years under various scenarios. Results also suggest that it is economically more efficient to control soybean aphids when the rate of intrinsic growth is relatively lower, the supply price elasticity of soybean acreage is relatively more elastic, and insecticide treatment costs per acre are lower. However, if the discovery of the gene Rag-1 (TF04048) leads to new cultivars that withstand the soybean aphid, our estimates will overestimate the actual damages. Even so, our analysis demonstrates that it is critical to control soybean aphids early in their infestation cycle to avoid a rapid increase in damages.soybean aphid, invasive species, producer surplus, consumer surplus, Rag-1, Crop Production/Industries,

The Conservation Reserve Program: Economic Implications for Rural America

This report estimates the impact that high levels of enrollment in the Conservation Reserve Program (CRP) have had on economic trends in rural counties since the program's inception in 1985 until today. The results of a growth model and quasi-experimental control group analysis indicate no discernible impact by the CRP on aggregate county population trends. Aggregate employment growth may have slowed in some high-CRP counties, but only temporarily. High levels of CRP enrollment appear to have affected farm-related businesses over the long run, but growth in the number of other nonfarm businesses moderated CRP's impact on total employment. If CRP contracts had ended in 2001, simulation models suggest that roughly 51 percent of CRP land would have returned to crop production, and that spending on outdoor recreation would decrease by as much as $300 million per year in rural areas. The resulting impacts on employment and income vary widely among regions having similar CRP enrollments, depending upon local economic conditions.Community/Rural/Urban Development, Land Economics/Use,