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,

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,

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,

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,

Land-Use Change and Carbon Sinks: Econometric Estimation of the Carbon Sequestration Supply Function

When and if the United States chooses to implement a greenhouse gas reduction program, it will be necessary to decide whether carbon sequestration policies, such as those that promote forestation and discourage deforestation, should be part of the domestic portfolio of compliance activities. We investigate the cost of forest-based carbon sequestration. In contrast with previous approaches, we econometrically examine micro-data on revealed landowner preferences, modeling six major private land uses in a comprehensive analysis of the contiguous United States. The econometric estimates are used to simulate landowner responses to sequestration policies. Key commodity prices are treated as endogenous and a carbon sink model is used to predict changes in carbon storage. Our estimated marginal costs of carbon sequestration are greater than those from previous engineering cost analyses and sectoral optimization models. Our estimated sequestration supply function is similar to the carbon abatement supply function from energy-based analyses, suggesting that forest-based carbon sequestration merits inclusion in a cost-effective portfolio of domestic U.S. climate change strategies.Environment, Regulatory Reform

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,

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,

Land-use change and carbon sinks: Econometric estimation of the carbon sequestration supply function

Increased attention by policy makers to the threat of global climate change has brought with it considerable interest in the possibility of encouraging the expansion of forest area as a means of sequestering carbon dioxide. The marginal costs of carbon sequestration or, equivalently, the carbon sequestration supply function will determine the ultimate effects and desirability of policies aimed at enhancing carbon uptake. In particular, marginal sequestration costs are the critical statistic for identifying a cost-effective policy mix to mitigate net carbon dioxide emissions. We develop a framework for conducting an econometric analysis of land use for the forty-eight contiguous United States and employing it to estimate the carbon sequestration supply function. By estimating the opportunity costs of land on the basis of econometric evidence of landowners' actual behavior, we aim to circumvent many of the shortcomings of previous sequestration cost assessments. By conducting the first nationwide econometric estimation of sequestration costs, endogenizing prices for land-based commodities, and estimating land-use transition probabilities in a framework that explicitly considers the range of land-use alternatives, we hope to provide better estimates eventually of the true costs of large-scale carbon sequestration efforts. In this way, we seek to add to understanding of the costs and potential of this strategy for addressing the threat of global climate change

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,