Spillovers

Interstate and international spillovers from public agricultural research and development (R&D) investments account for a significant share of agricultural productivitygrowth. Hence, spillovers of agricultural R&D results across geopolitical boundaries have implications for measures of research impacts on productivity, and the implied rates of return to research, as well as for state, national and international agricultural research policy. In studies of aggregate state or national agricultural productivity, interstate or international R&D spillovers might account for half or more of the total measured productivitygrowth. Similarly, results from studies of particular crop technologies indicate that international technology spillovers, and multinational impacts of technologies from international centres, were important elements in the total picture of agricultural development in the 20th Century. Within countries, funding institutions have been developed to address spatial spillovers of agricultural technologies. The fact that corresponding institutions have not been developed for international spillovers has contributed to a global underinvestment in certain types of agricultural research.Research and Development/Tech Change/Emerging Technologies,

The Demand for Food in the United States: A Review of the Literature, Evaluation of Previous Estimates, and Presentation of New Estimates of Demand

Demand and Price Analysis, Food Consumption/Nutrition/Food Safety,

An exact approach for evaluating the benefits from technological change

It is commonly believed that taxing agricultural commodities in developing countries, and subsidizing agricultural commodities in industrial countries, reduces incentives in the developing countries for both current production and longer-term investments in capital, knowledge, technology, and infrastructure. It is argued that distortions in agricultural markets have kept investments in research and development, and productivity rates low in agriculture in developing countries. Martin and Alston lay the theoretical foundation for empirical studies of how such distortions affect returns to agricultural research and development in developing countries. Earlier studies of the benefits from technological change have typically used partial equilibrium models with Marshallian welfare measures. Such models have not allowed for a general set of market distortions and market interactions. Techniques recently developed for evaluating welfare in the context of general equilibrium models better measure the implications of trade distorting policies. Martin and Alston describe how to harness these approaches to evaluate the benefits and costs of technological changes. They show that a modified trade expenditure function can be used to measure welfare changes exactly, with a model consistent with the optimizing behavior of both producers and consumers. They do so in a general setting that allows for multiple market distortions and multiple paths of general equilibrium feedback. They illustrate this approach using a quadratic form for a profit function that is a component of the trade expenditure function. They spell out, in principle, how to apply this approach with minimal requirements for additional information, using the results from a computable general equilibrium model. They provide a diagram to illustrate the application of the technique.Environmental Economics&Policies,Economic Theory&Research,Access to Markets,Markets and Market Access,Consumption

Farm Commodity Policy and Obesity

Many commentators have claimed that farm subsidies have contributed significantly to the “obesity epidemic” by making fattening foods relatively cheap and abundant and, symmetrically, that taxing “unhealthy” commodities or subsidizing “healthy” commodities would contribute to reducing obesity rates. This paper makes three contributions. First, we review evidence from the literature on the impacts on food consumption and obesity resulting from subsidies applied in the past to production or consumption of farm commodities. Second, we develop and present new arguments and preliminary evidence on the impacts of past government investments in agricultural R&D on food consumption and obesity—through research-induced increases in agricultural productivity and the consequences for prices, production, and consumption of farm commodities. Third, we consider and compare the economic efficiency of hypothetical agricultural research policies (changing the orientation of agricultural research investments) versus hypothetical agricultural commodity subsidies and taxes as alternative mechanisms for encouraging consumption of healthy food or discouraging consumption of unhealthy food, or both.Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Health Economics and Policy,

A DIFFERENTIATED GOODS MODEL OF THE EFFECTS OF EUROPEAN POLICIES IN INTERNATIONAL POULTRY MARKETS

The Common Agricultural Policy increases European poultry production costs, prohibits imports, increases domestic prices, and subsidizes exports. This policy has displaced some U.S. exports. However, the net impact in the U.S. has been quite modest, even assuming poultry is homogeneous, independent of source country. Costs to U.S. producers are almost entirely offset by gains to U.S. consumers. Effects in the U.S. are even smaller when imperfect substitutability between poultry from different countries is accounted for. A retaliatory U.S. export subsidy would have more dramatic effects in U.S. markets.International Relations/Trade,

CONSUMER DEMAND ANALYSIS ACCORDING TO GARP

The nonparametric approach to consumer-demand analysis-based on revealed-preference axioms-is reviewed. Particular attention is paid to questions of size and power of tests for consistency of data with the existence of a stable, well-behaved utility function that could have generated the data. An application to Australian meat demand is used to show how these notions can be quantified and how prior information about elasticities, following Sakong and Hayes, may be used to increase the power of the approach.

Taxes and quality: A market-level analysis

Aconventional assumption of product homogeneity when the commodity of interest is actually heterogeneous will lead to errors in an analysis of the incidence of policies, such as taxes. In this article, an equilibrium displacement model is used to derive analytical solutions for price, quantity, and quality effects of ad valorem and per unit taxes. The results show how parameters determine the effects of tax policies on quality. The potential for tax-induced distortions in quality, and the distributive consequences of those distortions, are illustrated in a case study of the market for Australian wine.Resource /Energy Economics and Policy,

CAN WE TAKE THE CON OUT OF MEAT DEMAND STUDIES?

Whimsy in specification choices leads to fragility of inference in econometric studies of structural change in meat demand. The literature contains a variety of results, with many contradictions, attributable largely to differences in specifications. This article reviews that literature, uses synthetic data to demonstrate the sensitivity of results to specification choices and to evaluate the power of nonparametric tests, and uses Canadian data to demonstrate a preferred approach to testing the hypothesis of structural change.Demand and Price Analysis,

STATE TRADING VERSUS EXPORT SUBSIDIES: THE CASE OF CANADIAN WHEAT

Canada and the United States have used different trade policies to support their wheat industries. Canada conferred sole export powers to the Canadian Wheat Board, allowing it to price discriminate among markets. The U.S. government has funded transfers to its wheat producers from taxpayers, instead, through export subsidies. This study compares these two ways of supporting producers in terms of their transfer efficiency and overall deadweight losses, the incidence on different domestic interest groups, and their consequences for third party traders. In the analysis we consider the implications of market power of wheat marketing firms for the comparison of policy alternatives in the context of the Canadian wheat industry.International Relations/Trade,

The effects of the U.S. Plant Variety Protection Act on wheat genetic improvement:

The U.S. Plant Variety Protection Act (PVPA) of 1970 was meant to strengthen intellectual property protection for plant breeders. A model of investment under partial excludability is developed, leading to the hypotheses that any increase in excludability or appropriability of the returns to invention, attributable to the PVPA, would lead to increases in investment or efficiency gains in varietal R&D, improved varietal quality, and enhanced royalties. These hypotheses are tested in an economic analysis of the effects of the PVPA on wheat genetic improvement. The PVPA appears to have contributed to increases in public expenditures on wheat variety improvement, but private-sector investment in wheat breeding does not appear to have increased. Moreover, econometric analyses indicate that the PVPA has not caused any increase in experimental or commercial wheat yields. However, the share of U.S. wheat acreage sown to private varieties has increased–from 3 percent in 1970 to 30 percent in the 1990s. These findings indicate that the PVPA has served primarily as a marketing tool with little impact on excludability or appropriability.Intellectual property., Plant breeding., Wheat., Economics.,