POLITICS, ECONOMICS AND THE REGULATION OF DIRECT INTERSTATE SHIPPING IN THE WINE INDUSTRY

In 1986, the State of California passed legislation restricting the direct importation of wine from another state by California residents unless the originating state allowed the reciprocal privilege of direct shipment from California wineries to residents in that state. This proved to be the opening salvo in a series of legislative and judicial battles across the country. State direct shipment regulations that were uniform across 47 of the 50 states prior to 1986 now constitute a patchwork of regulations. This raises unique interstate trade questions due to the special treatment of alcohol in the U.S. Constitution. While the Commerce Clause forbids states from discriminating against interstate commerce, the 21st Amendment affords states the right to regulate alcohol within their borders. Courts are divided in their opinions on direct shipment regulation; some find that prohibiting direct shipment unconstitutionally restricts interstate commerce while others find the regulations consistent with the public interest rationale of the 21st Amendment. This paper attempts to shed light on the motivations for the various forms of regulation adopted across states in response to California's adoption of reciprocity. Using a competing risks hazard model, we examine how various economic and public interest factors affect the speed with which a state adopts a change in its direct shipment regulation and that nature of that change. Our results suggest that economic considerations, not public interest factors, lie at the root of direct shipment regulations in the wine industry.Agribusiness,

Concentration, Contracting and Competition: Problems in Using the Packers and Stockyards Act to Supplement Antitrust

Consolidation and increased concentration in the agrifood sector over the past two decades, combined with an increased use of alternative marketing agreements in the poultry and livestock industries, have fueled concerns of anti-competitive behavior among large agribusinesses such as the major meat packing companies. The DOJ and USDA have partnered together in a pledge to strengthen enforcement both of antitrust restrictions and of the Packers and Stockyards Act of 1921 ("PSA"). This paper provides a brief overview of the ongoing changes in the meat and livestock industries and the role of the PSA. The paper then outlines several challenges facing the successful and efficient use of the PSA as a competition policy from both theoretical and empirical economic perspectives

Putting Theories of the Firm in Their Place: A Supplemental Digest of the New Institutional Economics

Institutional and Behavioral Economics,

FARMER TRUST IN AGRICULTURAL COOPERATIVES: EVIDENCE FROM MISSOURI CORN AND SOYBEAN PRODUCERS

We examine whether cooperatives are characterized by greater trust than investor-owned firms. We survey 2000 Missouri corn and soybean farmers and find that trust and farmer perceptions of trustworthiness and competence are higher in cooperatives than in investor-owned firms and that trust is a significant factor explaining the choice of farmers to market to cooperatives rather than investor-owned firms. Interestingly, we find that trust is more significant in producers' decisions for marketing soybeans than for corn.Agribusiness,

Regulating for Public Health: Motivations for and Efficacy of State Alcohol Regulations

Health Economics and Policy,

Calm Down About Common Ownership

Proponents of additional antitrust intervention to police common ownership simply have not made their case. Their theory as to why current levels of intra-industry diversification would cause consumer harm is implausible and the empirical evidence they say demonstrates such harm is both scant and methodologically suspect. The policy solutions they have proposed for dealing with the purported problem would radically rework an industry that has provided substantial benefits to investors, raising the costs of portfolio diversification and enhancing agency costs at public companies. Courts and antitrust enforcers should reject their calls for additional antitrust intervention to police common ownership

A New Institutional Economics Approach to Contracts and Cooperatives

This paper was prepared as an invited Principal Paper for the 2001 annual meeting of the American Agricultural Economics Association. Forthcoming in American Journal of Agricultural Economics Vol. 83, No. 5, 2001.Includes bibliographical references.Our purpose in this paper is to highlight the role of organizational structure and incentives in the design of contracts between buyers and sellers of agricultural products. In particular, we consider how differences between investor-owned (IOF) and producer-oriented (POF) firms, and differences between alternate types of POFs, may affect the types of contract terms those respective organizations are likely to prefer in their contracts with agricultural producers. New institutional economics theories of contracting, agency and property rights allocation suggest that cooperative contractors may be able to design contracts that enhance economic efficiency that IOFs cannot easily replicate

The Case for Doing Nothing about Institutional Investors\u27 Common Ownership of Small Stakes in Competing Firms

Recent empirical research purports to demonstrate that institutional investors\u27 common ownership of small stakes in competing firms causes those firms to compete less aggressively, injuring consumers. A number of prominent antitrust scholars have cited this research as grounds for limiting the degree to which institutional investors may hold stakes in multiple firms that compete in any concentrated market. This Article contends that the purported competitive problem is overblown and that the proposed solutions would reduce overall social welfare. With respect to the purported problem, we show that the theory of anti-competitive harm from institutional investors\u27 common ownership is implausible and that the empirical studies supporting the theory are methodologically unsound. The theory fails to account for the fact that intra-industry diversified institutional investors are also inter-industry diversified, and it rests upon unrealistic assumptions about managerial decision-making. The empirical studies purporting to demonstrate anti-competitive harm from common ownership are deficient because the inaccurately assess institutional investors\u27 economic interests and employ an endogenous measure that precludes causal inferences

Markets, Contracts, or Integration? The Adoption, Diffusion, and Evolution of Organizational Form

The rise of contract farming and vertical integration is one of the most important changes in modern agriculture. Yet the adoption and diffusion of these new forms of organization has varied widely across regions, commodities, or farm types, however. Transaction cost theories and the like are not fully effective at explaining the variation of adoption rates of different organizational forms, in part because of their inherent static nature. In order to explain the adoption, diffusion and evolution of organizational form, a more dynamic framework is required. This paper lays out such a framework for understanding the evolution of organizational practices in U.S. agriculture by drawing on existing theories of economic organization, the diffusion of technological innovation, and organizational complementarities. Using recent trends as stylized facts we argue that the agrifood sector is characterized by strong complementarities among its constituent features and that these complementarities help explain the stylized facts. We also discuss several testable hypotheses concerning changes in organizational form in agriculture.contracting, vertical integration, organizational innovation, diffusion, Institutional and Behavioral Economics, L14, L22, Q13, O33,