The Effect of Foot and Mouth Disease on Trade and Prices in International Beef Markets

The paper develops and uses a two step quantitative model to analyze the effect of Foot and Mouth Disease (FMD) on international beef markets over time. Using monthly data from 1990-2002 for 7 major beef exporters and for 22 major beef importers, we use a probit equation to estimate the probability that country i exports to country j, taking account of foot and mouth status of exporter, sanitary policy of importer, beef quality, trade preferences, distance, and other factors affecting whether beef trade occurs. We then use OLS to estimate the export prices that are obtained for beef, taking account of beef quality, country per capita, trading preferences, region, per capita income, and a time trend, including terms to adjust for censorship in the first stage. Using the estimated equations, we compare the predicted change in trading partners and in the prices received by the two exporters in our sample that are not FMD free, Brazil and Uruguay, under the assumption that their status switches from having FMD to being FMD free. The model performs well. The results suggest that FMD continues to impede trade between many countries and does accordingly reduce the price received for beef from countries with FMD. Nonetheless, the "sanction" from FMD appears smaller than previously believed.International Relations/Trade,

The Effect of Foot and Mouth Disease on Trade and Prices in International Beef Markets

The paper develops and uses a two step quantitative model to analyze the effect of Foot and Mouth Disease (FMD) on international beef markets over time. Using monthly data from 1990-2002 for 7 major beef exporters and for 22 major beef importers, we use a probit equation to estimate the probability that country i exports to country j, taking account of foot and mouth status of exporter, sanitary policy of importer, beef quality, trade preferences, distance, and other factors affecting whether beef trade occurs. We then use OLS to estimate the export prices that are obtained for beef, taking account of beef quality, country per capita, trading preferences, region, per capita income, and a time trend, including terms to adjust for censorship in the first stage. Using the estimated equations, we compare the predicted change in trading partners and in the prices received by the two exporters in our sample that are not FMD free, Brazil and Uruguay, under the assumption that their status switches from having FMD to being FMD free. The model performs well. The results suggest that FMD continues to impede trade between many countries and does accordingly reduce the price received for beef from countries with FMD. Nonetheless, the "sanction" from FMD appears smaller than previously believed

The Economic Returns to Public Agricultural Research in Uruguay

We use newly constructed data to model and measure agricultural productivity growth and the returns to public agricultural research conducted in Uruguay over the period 1961–2010. We pay attention specifically to the role of levy-based funding under INIA, which was established in 1990. Our results indicate that the creation of INIA was associated with a revitalization of funding for agricultural R&D in Uruguay, which spurred sustained growth in agricultural productivity during the past two decades when productivity growth was stagnating in many other countries. The econometric results were somewhat sensitive to specification choices. The preferred model includes two other variables with common trends, a time-trend variable and a proxy for private research impacts, as well as a variable representing the stock of public agricultural knowledge that entailed a lag distribution with a peak impact at year 24 of the 25- year lag. It implies a marginal benefit-cost ratio of 48.2, using a real discount rate of 5 percent per annum and a modified internal rate of return of 24% per annum. The benefit-cost ratio varied significantly across models with different lag structures or that omitted the trend or the private research variable, but across the same models the modified internal rate of return was very stable, ranging from 23% per annum to 27% per annum. These results suggest that the revitalized investment in research spending under INIA has been very profitable for Uruguay, and that a greater rate of investment would have been justified

Public Policy, Invasive Species and Animal Disease Management

There has been a rapid increase in recent years in invasive species and animal management economic research. Expanded interest in the topic has been partially driven by the practical importance of public policy to deal effectively with invasive species, given its public good aspects. This paper shows that the basic criteria of public goods: non-rivalry and non-excludability, apply directly to animal disease border measures and eradication services, with some caveats. It is also argued that public policy should assess disease control and eradication on grounds of biology, national economic interests, and international cooperation. Specific regulations and programs must be evaluated on the basis of cost benefit principles

The benefits from public agricultural research in Uruguay

We use newly constructed data to model and measure agricultural productivity growth and the returns to public agricultural research conducted in Uruguay over the period 1961–2010. We pay attention specifically to the role of levy-based funding under INIA, which was established in 1990. Our results indicate that the creation of INIA was associated with a revitalization of funding for agricultural R&D in Uruguay, which spurred sustained growth in agricultural productivity during the past two decades when productivity growth was stagnating in many other countries. The econometric results were somewhat sensitive to specification choices. The preferred model includes two other variables with common trends, a time-trend variable and a proxy for private research impacts, as well as a variable representing the stock of public agricultural knowledge that entailed a lag distribution with a peak impact at year 24 of the 25-year lag. It implies a marginal benefit-cost ratio of 48.2, using a real discount rate of 5 per cent per annum and a modified internal rate of return of 24 per cent per annum. The benefit-cost ratio varied significantly across models with different lag structures or that omitted the trend or the private research variable, but across the same models, the modified internal rate of return was very stable, ranging from 23 per cent per annum to 27 per cent per annum. These results suggest that the revitalized investment in research spending under INIA has been very profitable for Uruguay and that a greater rate of investment would have been justified

Public Policy, Invasive Species and Animal Disease Management

There has been a rapid increase in recent years in invasive species and animal management economic research. Expanded interest in the topic has been partially driven by the practical importance of public policy to deal effectively with invasive species, given its public good aspects. This paper shows that the basic criteria of public goods: non-rivalry and non-excludability, apply directly to animal disease border measures and eradication services, with some caveats. It is also argued that public policy should assess disease control and eradication on grounds of biology, national economic interests, and international cooperation. Specific regulations and programs must be evaluated on the basis of cost benefit principles.Invasive species, Animal disease management, BSE, FMD, Sanitary barriers to trade, Agricultural and Food Policy, International Relations/Trade, Livestock Production/Industries,

ARE Update Volume 9, Number 4

Immigration Reform: Implications for Agriculture.Democracy and Environmental Quality.Are International Beef Prices Converging and, if so, Why