Determinants of agricultural protection from an international perspective: The role of political institutions

"This paper explores the role of political institutions in determining the ability of agriculture to avoid taxation in developing countries or attract government transfers in industrialized countries. The utilized model is based on a probabilistic voting environment, wherein rural districts are less ideologically committed than urban districts in industrialized countries, and the reverse is true in developing countries. As a consequence, in industrialized (developing) countries rural (urban) districts are pivotal in determining the coalition that obtains a majority, whereas urban (rural) districts are pivotal within the majority itself. In bargaining at the level of the legislature, this generates a conflict between a government that tends to favor rural (urban) districts, and a parliamentary majority that is dominated by urban (rural) concerns. As district size grows and the electoral system converges to a purely proportional system, both of these biases are attenuated. Overall, we see opposing nonlinear relationships between district size and agricultural subsidies on the one hand and district size and taxation on the other. In developing countries, taxation of agriculture first increases and then decreases with district magnitude; in industrialized countries, agricultural subsidization first increases and then decreases with district magnitude. Moreover, the impact of district magnitude on the level of agricultural subsidization is attenuated in presidential versus parliamentary systems, while the level of agricultural taxation is amplified in presidential systems. In the present paper, these findings are first theorized and then empirically confirmed by a cross-country analysis of data from 37 countries over a 20-year period." from authors' abstractpolitical economy of agricultural protectionism, Agricultural policies, Urban-rural differences, political institutions,

Determinants of Agricultural Protection in an International Perspective: The Role of Political Institutions

Abstract—This paper studies the role of political institutions in determining the political success of agriculture in avoiding taxation or attracting government transfers in developing and industrialized countries, respectively. The model is based on a probabilistic voting environment, where in industrialized countries rural districts are less ideologically committed than urban districts, while in developing countries urban districts are less ideologically committed than rural districts. As a consequence, in industrialized (developing) countries rural (urban) districts are pivotal in determining the coalition that obtains a majority, whereas urban (rural) districts are pivotal within the majority itself. In bargaining at the legislature, this generates a conflict between the government, who will tend to favor rural (urban) districts, and its parliamentary majority, that will be dominated by urban (rural) concerns. As district size grows and the electoral system converges to a pure proportional system, both of these biases are attenuated. Overall, an opposite nonlinear relationship between district size and agricultural subsidies on the one hand and district size and taxation on the other hand follows, i.e. in developing countries taxation of agriculture first increases and then decreases with district magnitude, while in industrialized countries agricultural subsidization first increases and then decreases with district magnitude. Moreover, the impact of district magnitude on the level of agricultural subsidization is attenuated in presidential when compared to parliamentary systems, while the level of agricultural taxation is amplified in presidential systems. Empirical results from cross-country analysis including 37 countries over 20 years mainly support our theory.Political Institutions, Agricultural Protection, Probabilistic Voting Model, International Relations/Trade,

Networks as determinants of rural migration

This paper focuses on networks as determinants of rural migration and the importance of networks in a rural development perspective. Furthermore the impact of public goods and amenities on migration decisions in rural regions is investigated. Special attention is paid on heterogeneity in peoples migration-decisive components. Data base is a non-farm household-survey of four rural communities in Poland. The estimations show that migration decisions are influenceable in different ways: Social networks as well as socio-economic components and the regional public-good endowment are important drivers of migration, but the direction and amount of influence depends on individual-preferences and on individual network-structures - among other things especially on the network-localization.Migration, rural development, social networks, latent class model, Community/Rural/Urban Development, R23, D83, H41,

Entkoppelte Direktzahlungen: Meilenstein auf dem Weg zu einer rationalen Wirtschaftspolitik und politische Entwaffnung der Agrarlobbyisten?

Agricultural and Food Policy, Political Economy, Teaching/Communication/Extension/Profession,

The emergence of local elite networks: Structure or preference? - An econometric approach -

This paper analyzes the determinants and causes of communication in local elite networks. The database comprises four rural county elite networks from Poland and Slovakia. Socio spatial processes allowing a flexible incorporation of individual specific information are embedded within a logit framework. Empirical analysis focuses on the assessment of the hypotheses, whether preferences measured by socio demographic factors and political ideology or institutional settings (structure) influence individual communication in local elite networks. The results suggest that while in high performing communities institutional settings, i.e. a common membership in local organizations, are the most important factors determining communication, in low performing communities communication ties are stronger determined by actors’ preferences, i.e. ideological distances and socio demographic factors. Moreover, communication is more centralized for the latter when compared to the former socio spatial process

FARM HOUSEHOLD DECISIONS UNDER VARIOUS TAX POLICIES: COMPARATIVE STATIC RESULTS AND EVIDENCE FROM HOUSEHOLD DATA

The study is devoted to the comparative static analysis and econometric estimation of farm household decisions under both standard and agricultural taxes. Accounting for labor market constraints a non-separable model is constructed implying increasing per-unit costs of accessing labor markets. To control for tax-induced adjustments related to labor market imperfections we compare the results to those derived from a separable approach, assuming perfect labor markets. Theoretical results suggest that most tax-induced responses are ambivalent mainly caused by shadow prices effects. Further, tax-induced effects differ between the two model versions. In particular standard taxes may imply production adjustments in the case of non-separability. Thus, income and value-added taxes are no more necessarily superior to agricultural taxes. Econometric analysis using individual household data from Mid-West Poland indicates remarkable responses to market surplus and input taxes. In contrast, standard and land taxes imply only negligible production adjustments. Thus, they seem to be superior, at least in the Polish case.Agricultural Finance, Consumer/Household Economics,

The logic of the CAP: Politics or Economics?

Distorted incentives, agricultural and trade policy reforms, national agricultural development, Agricultural and Food Policy, International Relations/Trade, F13, F14, Q17, Q18,

Farm household decisions under various tax policies: Comparative static results and evidence from household data

The study is devoted to the comparative static analysis and econometric estimation of farm household decisions under both standard and agricultural taxes. Accounting for labor market constraints a non-separable model is constructed implying increasing per-unit costs of accessing labor markets. To control for tax-induced adjustments related to labor market imperfections we compare the results to those derived from a separable approach, assuming perfect labor markets. Theoretical results suggest that most tax-induced responses are ambivalent mainly caused by shadow prices effects. Further, tax-induced effects differ between the two model versions. In particular standard taxes may imply production adjustments in the case of non-separability. Thus, income and value-added taxes are no more necessarily superior to agricultural taxes. Econometric analysis using individual household data from Mid-West Poland indicates remarkable responses to market surplus and input taxes. In contrast, standard and land taxes imply only negligible production adjustments. Thus, they seem to be superior, at least in the Polish case. --

Networks and Transaction Costs

Based on the well-known fact that social networks can provide effective mechanisms that help to increase the trust level between two trade partners, we apply a simple game-theoretical framework to derive transaction costs as a high risk of opportunistic behavior in a repeated trade relation determined by the density and size of trading networks. In the empirical part of the paper we apply a two stage procedure to estimate the impact of social network structures on farm’s transaction costs observed for different input and output markets. At a first stage we estimate a multiple input-multiple output stochastic Ray production function to generate relative shadow prices of three inputs and two outputs traded by farms. At a second stage a structural equation system is derived from the first order conditions of farm’s profit maximization to estimate simultaneously the of commodity specific transaction cost functions for all traded farm inputs and outputs. Estimation results based on a sample of 315 Polish farms imply a significant influence of social network structures on farm’s transaction costs. Moreover, estimated transaction costs correspond to a reasonable amount of farm specific shadow prices.Resource /Energy Economics and Policy,

INSTITUTIONAL FOUNDATION OF AGRICULTURAL PROTECTION: THE CASE OF EU-ACCESSION AND AGRICULTURAL POLICY IN EASTERN EUROPEAN COUNTRIES

The literature on political economy analyses of agricultural protection mainly focus on the impact of economic and demographic structures on the level of agricultural protection (Tyers/Anderson 1992, Swinnen 1994, Rausser et al. 1974), although it is commonly accepted that beyond economic and demographic structures political institutions do have an impact on the political power of different interest groups and hence on agricultural policy output (Gardner 1987 as well as Binswanger et al. 1997). The impact of political institutions, e.g. the organization of legislature, election and party systems, on agricultural protection has hardly been taken into account explicitly in theoretical and empirical studies, yet. In this framework the paper investigates to what extent political institutions explain observed variances in the political power of the agrarian population in the ten Central and Eastern European Countries/Candidates (CEEC) applying for an accession of the EU. Moreover, it is analyzed to what extent EU-accession will be politically feasible given the specific political and economic framework conditions of the individual states. In particular, empirical analyses imply the following results: (i) the political power of the agrarian population varies significantly among the analyzed countries ranging from a relative low political weight of 0.115 of the agrarian population in Lativa up to an absolute political dominance of the agrarian population in Slovenia given a weight of 0.887. (ii) The political weights are significantly determined by political institutions. In particular, the more the election systems corresponds to a proportional representation and the more the parliamentary organization allows for a specialized representation of agrarian interests, e.g. bicameralism where a second chamber representing regional interests, and the more efficient the organization of agrarian interests, e.g. existence of a peasent party, the higher is the political weight of the agrarian population. (iii) Analyzing to what extent EU-accession is politically feasible in the CEEC-states we can show that, assuming national financing of EU-policy, EU-accession would be hardly politically feasible in any CEEC-countries. An exception might be seen in Slovenia. Thus political feasibility of EU-accession crucially depends on keeping the rule of financial solidarity. Moreover, assuming a comprehensive pre-accession CAP-reform will take place, possible options to achieve political feasibility in the CEEC-states under these conditions would be undertaking constitutional reforms. In particular, the implementation of electorate system corresponding closer to a proportional representation or the establishment of bicameralism would be, at least theoretically, possible options.Agricultural and Food Policy,