A rational expectations approach to the modelling of agricultural supply: a case study of Iowa

A dynamic model for agricultural supply where expectation of exogenous variables is assumed to be formed rationally is developed. Farmers are assumed to make choices that maximize the expected present values of their incomes streams subject to dynamic and stochastic technology and their information. Their information is assumed to include the actual distributions of the exogenous variables which includes prices. Hence, farmers decision rules depend, among other things, on the stochastic processes of crop prices;The solution for the dynamic optimization problem gives a set of nonlinear simultaneous equations subject to within and cross equation restrictions. The restrictions are the implications of ration expectation hypothesis;The model is fitted to aggregate time series data on corn and soybean and other related variables from the state of Iowa. The results indicate that there is a dynamic interaction among land allocation, crop yields and crop prices. The restrictions imposed are supported by the data. The results also indicate that corn acreage is more responsive to government price support than to market price

AGRICULTURAL LAND USE CHOICE: A DISCRETE CHOICE APPROACH

A discrete choice model and site-specific data are used to analyze land use choices between crop production and pasture in the Corn Belt. The results show that conversion probabilities depend on relative returns, land quality, and government policy. In general it is found that landowners are less inclined to remove land from crop production than to convert land to crop production.Land Economics/Use,

Taxing Snack Foods: What to Expect for Diet and Tax Revenues

Health researchers and health policy advocates have proposed levying excise taxes on snack foods as a possible way to address the growing prevalence of obesity and overweight in the United States. Some proposals suggest higher prices alone will change consumers' diets. Others claim that change will be possible if earmarked taxes are used to fund an information program. This research examines the potential impact of excise taxes on snack foods, using baseline data from a household survey of food purchases. To illustrate likely impacts, we examine how much salty snack purchases might be reduced under varying excise tax rates and possible consumer price responses. We find that relatively low tax rates of 1 cent per pound and 1 percent of value would not appreciably alter consumption - and, thus, would have little effect on diet quality or health outcomes - but would generate $40-$100 million in tax revenues.Food Consumption/Nutrition/Food Safety, Public Economics,

OBESITY AND NUTRIENT CONSUMPTION: A RATIONAL ADDICTION?

This study tests for a rational addiction to food nutrients as a potential explanation for the obesity epidemic. A random coefficients (mixed) logit model applied to household scanner data finds evidence of a strong, forward-looking addiction to carbohydrates. Consequently, price-based policies may be effective in controlling excessive nutrient intake.Food Consumption/Nutrition/Food Safety,

Resource Quality and Agricultural Productivity: Evidence from Sub-Saharan Africa and Implications for Ethiopia

Over the next several decades, trends in population, income, and urbanization are projected to raise world demand for cereals, roots, and tubers by about 40%, and for meat by about 60% (Pinstrup-Andersen, Pandya-Lorch, and Rosegrant, 1999). Population and demand for agricultural products are projected to grow nearly twice as fast in sub- Saharan Africa, at 2-3% per year, as they are in the world as a whole (FAO, 2000). Given land constraints in some areas and environmental concerns about agricultural land expansion in others, most of the increased production necessary to meet this demand will have to come from increased productivity on land already in agricultural production. Increasing agricultural productivity is especially critical in sub-Saharan Africa, where food security has been a persistent concern

Obesity and Nutrient Consumption: A Rational Addiction?

Widespread obesity in the U.S. is a relatively recent phenomenon, reaching epidemic proportions only in the last 15 years. However, existing research shows that while calorie expenditure through physical activity has not changed appreciably since 1980, calorie consumption has risen dramatically. Consequently, any explanation of obesity must address the reason why consumers tend to overeat in spite of somewhat obvious future health implications. This study tests for an addiction to food nutrients as a potential explanation for the obesity epidemic. Specifically, we use a random coefficients (mixed) logit model applied to household scanner data to test a multivariate version of the rational addiction model of Becker and Murphy and Chaloupka. We find evidence of a rational addiction to all nutrients protein, fat and carbohydrates as well as to sodium, but particularly strong evidence of a forward-looking addiction to carbohydrates. The implication of this finding is that price-based policies sin taxes or produce subsidies that change the expected future costs and benefits of consuming carbohydrate-intensive foods may be effective in controlling excessive nutrient intake.addiction, demand, mixed logit, nutrients, obesity., Food Consumption/Nutrition/Food Safety,

Are U.S. Consumers Tolerant of GM Foods?

Genetically modified (GM) foods have caused many controversies. One important controversy relates to tolerance?the impurity rate that is tolerated before a commodity must be labeled as genetically modified. Currently, the United States does not have a specific tolerance or threshold level for GM foods. This paper uses experimental auctions to determine consumers? acceptance of non-GM foods with zero, 1 percent, and 5 percent tolerance for genetically modified material. Our results indicate that consumers would pay less for food that tolerates GM material, but the discount is not significantly different for foods with 1-percent and 5-percent GM content. Key words: genetically modified (GM) foods, contamination thresholds, laboratory auctions, nth-price auction, vegetable oil, tortilla chips, russet potatoesgenetically modified foods; GM foods; contamination thresholds; laboratory auctions; nth-rice auction; vegetable oil; tortilla chips; russet potatoes

Should the United States Regulate Mandatory Labeling for Genetically Modified Foods?

Public debate continues over whether the United States should regulate genetically modified (GM) foods by imposing a mandatory labeling policy. This paper develops a model that shows that a voluntary GM-labeling policy results in higher welfare than a regulated mandatory GM-labeling policy, if consumers can accurately read the signals in each market. We then develop an experiment that shows consumers behave as if they can accurately identify signals for GM foods. Our model and results support the perspective that the United States has been prudent in fending off calls for regulations demanding a mandatory GM-labeling policy.genetically modified foods; laboratory auctions; vegetable oil; tortilla chips; russet potatoes; mandatory labeling; voluntary labeling; nth-price auction

Effects and Value of Verifiable Information in a Controversial Market: Evidence from Lab Auctions of Genetically Modified Food

Food products containing genetically modified (GM) ingredients have entered the market over the past decade. The biotech industry and environmental groups have disseminating conflicting private information about GM foods. This paper develops a unique methodology for valuing independent third-party information in such a setting and applies this method to consumersï¾’ willingness to pay for food products that might be GM. Data are collected from real consumers in an auction market setting with randomized information and labeling treatments. The average value of third-party information per lab participant is small, but the public good value across U.S. consumers is shown to be quite large.