How Cool is C.O.O.L.?

This paper develops a partial equilibrium model of a small open-economy producing and trading an unsafe product that is supplied by perfectly competitive producers. The presence of product safety considerations, in this case risks to health, introduces a wedge between the market prices producers receive and the higher risk-adjusted prices consumers respond to. The size of the wedge depends positively on the per-unit cost of illness and the proportion of unsafe units embodied in the parent risky product. The model is used to analyze the welfare effects of trade with and without a country-of-origin labeling (COOL) program. Assuming imports are less safe than domestic production, the welfare gains from trade in the absence of COOL are ambiguous and may justify the imposition of a trade ban. Even if a full ban does not improve welfare, some restriction of trade is always welfare-enhancing. These outcomes derive from an informational distortion that prevents consumers from distinguishing the different country-specific risks embodied in the foreign and domestic products resulting in a pooling equilibrium. The presence of a COOL program removes the informational distortion and generates a welfare maximizing separating equilibrium in which the safer (domestic) product commands a higher market price. In the presence of a COOL program, more trade caused by a reduction in protection is better than less trade.country-of-origin labeling, protection, product safety, welfare, Food Consumption/Nutrition/Food Safety, International Relations/Trade, F10, F13, L15,

The Effect of Increased Energy Prices on Agriculture: A Differential Supply Approach

The increase in energy prices between 2004 and 2007 has several potential consequences for aggregate agriculture in the U.S. We estimate the derived input demand elasticities for energy as well as capital, labor, and materials using the differential supply formulation. Given that the derived input demand for energy is inelastic, it is more price-responsive than the other inputs. The results also indicate that the U.S. aggregate agricultural supply function is responsive to energy prices.differential input demand, concavity constrained, energy, Agribusiness, Agricultural Finance, Demand and Price Analysis, Financial Economics, Industrial Organization, Labor and Human Capital, Land Economics/Use, Marketing, Production Economics, Productivity Analysis, Research Methods/ Statistical Methods, C30, Q11, Q42,

Estimation of Production Functions using Average Data

Agricultural economists rely on aggregated data at various levels depending on data availability and the econometric techniques employed. However, the implication of aggregation on economic relationships remains an open question. To examine the impact of aggregation on estimation, Monte Carlo techniques and data are employed on production practices.Research Methods/ Statistical Methods,

Impact of Capital Gains and Urban Pressure on Farmland Values: A Spatial Correlation Analysis

Farmland is a major component of wealth in the farm sector as well as wealth of farm households. This study contributes to our knowledge of variations in farmland prices by examining the extent to which farmland values are spatially correlated and to what extent that this spatial correlation can be explained by income to farmland.land values, spatial correlation, Land Economics/Use,

Urban Sprawl and Farmland Prices

A theoretical model of farmland valuation is developed that allows urban sprawl to affect farmland values through the conversion of farmland to urban uses, shifts in production to higher-valued crops, and the speculative effect of urban pressure on farmland values. This model is estimated using county level data in the continental United States. Evidence is found for all three effects of urban sprawl on farmland values, with a significant contribution of urban pressure on net agricultural returns around major urban centers. Ancillary evidence supports that the latter effect is attributable to shifts to high-valued crops.hedonic determinants, land prices, spatial productivity, urban sprawl, Land Economics/Use, R14, Q15, D24, C33,

Price Transmission and Food Scares in the U.S. Beef Sector

The advent of mad cow disease in Canada in the United States raises numerous concerns regarding consumer reaction to information in the United States. To examine the role of consumer reaction to information we examine the response of price spreads in the U.S. beef market to a Food Safety Index derived from Lexis-Nexis. Specifically, we estimate a vector error correction model to examine the long and short-run effect of news on price spreads. Our results indicate that informational shocks are fairly transient in the retail prices, but persist at the wholesale and farm level

Price Transmission and Food Scares in the U.S. Beef Sector

The advent of mad cow disease in Canada in the United States raises numerous concerns regarding consumer reaction to information in the United States. To examine the role of consumer reaction to information we examine the response of price spreads in the U.S. beef market to a Food Safety Index derived from Lexis-Nexis. Specifically, we estimate a vector error correction model to examine the long and short-run effect of news on price spreads. Our results indicate that informational shocks are fairly transient in the retail prices, but persist at the wholesale and farm level

How Cool is C.O.O.L.?

This paper develops a partial equilibrium model of a small open-economy producing and trading an unsafe product that is supplied by perfectly competitive producers. The presence of product safety considerations, in this case risks to health, introduces a wedge between the market prices producers receive and the higher risk-adjusted prices consumers respond to. The size of the wedge depends positively on the per-unit cost of illness and the proportion of unsafe units embodied in the parent risky product. The model is used to analyze the welfare effects of trade with and without a country-of-origin labeling (COOL) program. Assuming imports are less safe than domestic production, the welfare gains from trade in the absence of COOL are ambiguous and may justify the imposition of a trade ban. Even if a full ban does not improve welfare, some restriction of trade is always welfare-enhancing. These outcomes derive from an informational distortion that prevents consumers from distinguishing the different country-specific risks embodied in the foreign and domestic products resulting in a pooling equilibrium. The presence of a COOL program removes the informational distortion and generates a welfare maximizing separating equilibrium in which the safer (domestic) product commands a higher market price. In the presence of a COOL program, more trade - caused by a reduction in protection - is better than less trade

The Effect of Increased Energy Prices on Agriculture: A Differential Supply Approach

The increase in energy prices between 2004 and 2007 has several potential consequences for aggregate agriculture in the U.S. We estimate the derived input demand elasticities for energy as well as capital, labor, and materials using the differential supply formulation. Given that the derived input demand for energy is inelastic, it is more price-responsive than the other inputs. The results also indicate that the U.S. aggregate agricultural supply function is responsive to energy prices

Estimation of Production Functions using Average Data

Agricultural economists rely on aggregated data at various levels depending on data availability and the econometric techniques employed. However, the implication of aggregation on economic relationships remains an open question. To examine the impact of aggregation on estimation, Monte Carlo techniques and data are employed on production practices