Scale Effects and Mark-ups in the US Food and Fibre Industries: Capital Investment and Import Penetration Impacts

Capital investment patterns and import penetration are often alleged to influence firms' costs and prices, and thus economic performance. We examine the impacts of these factors on measures of scale economies, input demand/composition, and market power in the US food and fibre industries. Flexible variable cost functions incorporating quasi-fixity of three categories of private (internal) capital and two external technological and trade (import) factors represent the cost structures of the two industries. Pricing equations, based on inverse demand functions including import prices, represent output decisions. Cost and demand elasticities constructed from this model indicate reduced manufacturing costs from technical and trade, scale and capital effects. This increased cost efficiency arises largely from materials savings in the textiles industry and reduced labour use in the food industry. Mark-up behaviour is exhibited for most of the sample period in the textiles industry, and neither industry appears heavily affected by import prices.     

Returns from research in economies with policy distortions: hybrid sorghum in Sudan

Conventional estimates of the economic return to agricultural research use market prices for the values of products and inputs; on this basis, economic rates of return are typically well above the cost of capital, suggesting that more investment in research would be socially desirable. But these estimates may be incorrect if, as is often the case, market prices are distorted by market failures or government policies and hence do not reflect social values. This paper presents a simple, partial-equilibrium methodology with which to improve the measurement of social returns to research by taking account of multiple distortions in the market prices of products, inputs and foreign exchange. The method also takes account of variation in domestic and world prices, making a product tradable in some years and nontradable in others. The method is applied to the case of Hageen-Dura 1 (HD-1), Sub-Saharan Africa's first commercially successful hybrid sorghum. HD-1 was released in the Sudan in 1983. From the start of research in 1979 to 1992, the HD-1 breeding program had an estimated IRR of 97% when all major policies in the sorghum market, the fertilizer market, and the exchange rate are taken into account. The high rate of return to HD-1 research was due to the program's low cost and rapid payoff, pointing to the potential value of small adaptive research programs, taking full advantage of foreign technology and genetic material to produce locally-appropriate crosses in a short period of time. Even in the highly distorted economies of Africa, such programs can yield very high payoffs.     

林产加工业要素投入与影子价格及其影响分析——以江西林产加工业为例

以江西林产加工业为例,利用经验估计的生产函数和成本函数及其参数,对林产加工业的投入产出水平、生产要素和资源的影子价格及其影响进行了分析。得到结论:现有条件的林产加工业资金投入相对不足、劳力要素利用不充分,资源消耗过大;要素和资源市场机制的价格引导作用不灵敏。认为提高资源的利用效率和资源培育的林地产出效率是促进林产工业和资源培育产业良性循环发展的重要因素。     

加强资金管理与成本控制 促进地勘事业发展

资金是地勘单位的“血液”,成本是地勘单位的“命脉”,直接影响着地勘单位的经济效益,决定地勘单位能否实现快速发展。加强资金管理和成本控制关键要做好以下几点:(1)增强理财意识,形成齐抓共管局面;(2 )从宏观和微观两个层面上,加强队伍和制度建设,为抓好资金管理和成本控制做好组织和制度保证;(3 )加强资金收入管理,为发展提供保证;(4 )加强资金支出管理,控制成本费用,夯实发展基础;(5 )抓好资金管理与成本控制应注重分析外部市场环境,建立内部反馈机制及时纠正偏差,要提高财务人员的业务能力和素质。     

Determinants and impact of sustainable land management (SLM) investments: A systems evaluation in the Blue Nile Basin,Ethiopia

Ongoing debate over water management along the Blue Nile and land degradation in Ethiopia emphasizes the need for efficiency gains in agricultural production through sustainable land management (SLM). However, previous SLM studies overlook the tradeoffs involved in maintaining SLM investments over time. We address this limitation by combining a household survey that evaluates the economic impacts of SLM investments and maintenance, with a hydrological model that explores location‐specific infrastructure effects. We then use a multi‐market model to evaluate the impacts of alternative SLM investments on agricultural production, prices, and incomes over time. Analysis suggests SLM investments must be maintained for at least seven years to show significant increases in value of production, and that terraces on moderate and steep slopes are most effective in increasing agricultural yields. However, the benefits of terracing do not outweigh the cost of foregone off‐farm labor opportunities, nor compensate for lower agricultural prices from increased supply. Thus, SLM investments must be paired with other input and infrastructure investments, as well as subsidies for initial labor costs, in order to incentivize adoption and long‐term SLM maintenance.     

A model of entry–exit decisions and capacity choice under demand uncertainty

Many investment decisions of agribusiness firms, such as when to invest in an emerging market or whether to expand the capacity of the firm, involve irreversible investment and uncertainty about demand, cost or competition. This paper uses an option‐value model to examine the factors affecting an agribusiness firm's decision whether and how much to invest in an emerging market under demand uncertainty. Demand uncertainty and irreversibility of investment make investment less desirable than the net present value (NPV) rule indicates. The inactive firm is more reluctant to enter the market when it takes into account demand uncertainty because it preserves the opportunity of making a better investment later. The active firm is more reluctant to abandon the investment because there is an option value of keeping the operation alive. There is a greater distance between the entry and exit thresholds under the option‐value approach than under the NPV rule due to demand uncertainty. The results have implications for agribusiness decision‐making.     

Equilibrium Analysis of a Quota-regulated Market

Existing micro economic studies of quota-regulated markets have emphasized the short-run effects of market disturbances. This paper considers the long-run market equilibrium impacts of changes in technology, in input prices and in the distribution of output price when risk averse firms may freely enter and exit the regulated industry. Some of the results are intuitive, while others are not. In general, signing long-run equilibrium results requires a less restrictive preference structure than does signing short-run results. However, the nature of the equilibrating mechanism, ignored in partial analysis, is found to be important.     

Spatial regulation and international differences in the housebuilding industries

Housebuilding firms vary across the world in size and in the scope of their activities. This variety may seem surprising in an industry with open technologies and ease of entry. While market and technological factors may go some way to explain such differences, much of the causes of variation lie in dissimilarities in regulatory and institutional frameworks. These themes are explored through a comparative analysis of the structure of the residential development industry in Australia, the UK and the USA and in analysis of firm size hierarchies. The firm concentration ratio is much higher in the UK than the other two countries and the reasons may lie in the geography of the country but also in the peculiarities of its planning system.     

ENERGY BUDGETING: JOULES OR DOLLARS?

The assumptions which must be made to accept ratios of energy output to energy input as an efficiency measure with normative significance are examined and found to be unrealistic. It is considered better for governments to modify market prices where divergences exist between private and social costs or benefits than to use energy ratios, or prices determined by energy considerations, as a criterion in allocating resources. Moreover, in a trading world, energy considerations are often of little use in positive analysis of the relationship between energy prices and the prices, or profitability of production, of different foods in a particular country.     

Optimal vessel size and output in the Australian northern prawn fishery: a restricted profit function approach*

Individual transferable quotas (ITQs) are to be introduced into Australia’s Northern Prawn fishery in the near future. Total allowable catches (TACs) are to be set with the objective of maximising economic efficiency in the fishery. Under ITQs, vessel owners have the ability to adjust their fishing activities to maximise profits and changes in fleet structure resulting from management changes need to be considered when determining TACs. A restricted profit function for the fishery was estimated to determine the optimal vessel characteristics and output levels as a guide to how the fleet may adjust under an ITQ system. Vessels were found to be currently close to their optimal size given average historic prices and current stock conditions. However, higher tiger prawn stocks are expected to result in the average size of vessels increasing, with rising fuel prices also likely to result in capital being substituted for fishing days. Optimal average vessel‐level catches of the main species are lower than current average vessel catches for a wide range of input and output prices. These changes in vessel characteristics and behaviour need to be incorporated in the derivation of the optimal TACs if economic efficiency objectives are to be achieved.     

Are Food Certification Costs Misestimated? Exporter‐Perspective on the European Standard

Food safety regulations aimed at controlling food contamination have sometimes been criticised as excessive burdens, disadvantaging smaller firms and exports from developing nations. Reported food safety expenditures appear relatively small (from <1 to 7% of the value of production) but can erode profit margins for many firms. This article responds to claims that reported firm‐level expenditures do not reflect true costs of compliance with food safety systems. We estimate incidental cost savings and uncounted costs associated with Hazard Analysis and Critical Control Points (HACCP) certification among Philippine seafood producers by modelling the interactions between conventional production and food safety expenditures using translog cost functions. Results indicate a significant underestimation of reported HACCP costs by an average of US$1.10 for a dollar of reported expenditure.     

Location equilibria in a mixed duopsony with a cooperative

This work analyses a two‐stage price–location game between a profit maximising firm and a primary producers' cooperative. According to the results, the location equilibria are not fixed but depend on the intrinsic competitiveness of the spatial market. As the intrinsic competitiveness rises, the cooperative tends to be located closer to the middle point of the market. The limited differentiation in location entails an efficiency loss which is nevertheless smaller than that associated with the competition of two profit maximising firms (pure duopsony) on exactly the same spatial market. The superiority of a mixed duopsony lies in the fact that the resulting equilibrium locations entail lower total transportation cost relative to those of a pure duopsony.     

Using MANECSIM as a Simulation for Agribusiness Capstone Courses

MANECSIM is a business simulation especially developed for use in economic-based management classes. Students are put in charge of a firm and must make periodic managerial decisions in the areas of marketing, production, and finance in an environment in which economic conditions and competing firms influence the firm's performance. MANECSIM allows students to apply concepts and techniques learned about demand, forecasting, production, cost analyses, and financial planning—all major topics in agribusiness programs. The simulation offers an alternative to traditional case studies providing students with a "real-life" decision-making experience.     

Incentives and static and dynamic gains from market reform: rice production in Vietnam

This article develops a dynamic model to account for the enhanced incentive effects that result from market reform through a move toward private property rights and competitive markets. Reform is captured through an emerging profits function which depends on effective prices and incentives to work harder. Static and dynamic output gains from reform are derived through increases in total factor productivity and induced capital accumulation. The model is applied to rice production in Vietnam over the period 1976–94. The more extensive is market reform, the larger the effects found on rice output, the capital stock and transitional growth rates, suggesting that incentives and more competitive markets matter greatly.     

The Current State of the Russian Agricultural Sector

Russia's agriculture produces around 3.7 per cent of the country's GDP, employs 9.2 per cent of the national workforce and contributes around 6 per cent of the country's exports. The sector has shown remarkable resilience in the face of wider economic turbulence. Self‐sufficiency rates for the main agricultural commodities are relatively high. Agricultural exports have grown very significantly since 2000 especially for wheat and meslin (wheat and rye mixture). Meat production has been growing steadily, particularly in the poultry and pork sectors. Whilst the agri‐food sector has great potential to play an even more prominent role in Russia's economy, it suffers from relatively low productivity and an outdated technological base. The main drive for efficiency has come mainly from the relatively large‐scale agricultural firms, who generated more than half of the total value of agricultural output in 2016. Foreign policy instability, including economic sanctions, the devaluation of the national currency and declining economic growth have weakened the sector and caused an increase in the prices of imported goods and equipment. At the same time Russian products have replaced high value‐added imports and Russia's agricultural producers are expanding into new markets.     

The Value of Dairy Quota under a Commercial Export Milk Program

This paper argues that under a commercial export milk program, the market value of quota will be determined by the spread between the domestic market price and the export price, rather than the conventional wisdom that it is determined by the spread between the domestic milk price and the marginal cost of production. Under this new economy, it is argued that ultimately the market price of dairy quota will be priced independently of firm marginal costs, which implies that low-cost (or high-margin) producers will not hold an economic advantage in bidding for quota over higher-cost producers. Regression results are consistent with the hypothesized positive relationship between quota values and the difference between domestic and export milk price. The average export price has generally increased over time and is approximately equal to the marginal cost for an average producer. The results have implications for a World Trade Organization (WTO) challenge. New Zealand and the United States feel the domestic program acts as an export subsidy by cross-subsidizing production of commercial export milk. The results here suggest that the prices for the filled export contracts are approximately the marginal cost of production for the average producer and not lower, as suggested by the challenge. Export contracts were found to have higher price risk than domestically produced milk. The risk is compounded by the short-term nature of most export contracts. The increase in risk for the commercial export milk program (CEM) implies that it is unlikely many farmers will greatly diversify into CEM contracts unless the uncertainty is reduced.     

What Causes Spatial Variations in Economic Development in the United States?

This article examines the causes of spatial disparities in economic development in the United States. A theoretical model is developed to analyze the location decisions of firms and households. An empirical model is estimated to quantify the contribution of alternative factors to spatial variations in wage, employment density, housing price, and land development density. Results suggest that remoteness is a primary cause of spatial disparities in economic development, while natural amenities are a major determinant of housing prices. Despite the dominant role of geography, public investments in infrastructure and human capital development could contribute to economic development in remote areas.     

Extra-legal land market dynamics on a Guatemalan agricultural frontier: Implications for neoliberal land policies

Neoliberal land policies such as land administration seek to improve property rights and the efficiency of land markets to boost rural economic production. Quantitative studies of pre-existing land markets can help planners to tailor these policies to local conditions. In this article we examine an extra-legal land market currently being modernized by a World Bank-sponsored land administration effort. Specifically, we use a hedonic-type revealed preference model and household survey data to estimate the factors affecting extra-legal land prices along an agricultural frontier in Petén, Guatemala. Our model indicates that land value is significantly affected by land attributes including location, tenure status, presence of water, distance to roads, and distance to landowners’ homes, and that land prices in the northwestern Petén are estimated to have risen on average 26.5% per year between 1977 and 2000. We contend that this rate of increase provides a strong incentive for colonists to speculate in land rather than invest in state sanctioned property rights. We conclude that if frontier development programs, such as land administration, are to become attractive to settlers in Petén and elsewhere, they must compete favorably with economic incentives associated with land speculation, or alternatively, target landowners who are not interested in playing the land market.     

住宅投资、要素结构与配置效率——基于北京市各区县的实证研究

研究目的:估算各类资本存量、生产函数要素弹性系数和要素边际报酬率,实证研究住宅价格及其资本存量的内涵型和外延型资源配置机制,考察它们对要素配置效率和全要素生产率扭曲程度的影响。研究方法:理论模型法,面板校正标准误法(PCSE)。研究结果:(1)住宅开发主要通过投资而非价格产生影响,抵押担保效应、要素挤出效应和技术创新效应很显著,其他效应不显著;(2)住宅资本存量对要素配置效率和全要素生产率扭曲的影响也显著,而住宅价格的影响面和显著性都较低。研究结论:住宅资本存量比住宅价格的资源配置效应更强,都恶化了非住宅业资源配置扭曲度。因此,要盘活存量、优化增量和管好总量,完善住宅调控基础性制度安排,科学测度和控制住宅价格及增速。     

What Explains Agricultural Price Movements?

After 2005, commodity prices experienced their longest and broadest boom since World War II. Agricultural prices have now come down considerably since their 2011 peak, but are still 40% higher in real terms than their 2000 lows. This paper briefly addresses the main arguments on the causes of the agricultural price cycle. It broadens the scope of analysis by focusing on six agricultural commodities, and identifies the relative weights of key quantifiable drivers of their prices. It concludes that increases in real income negatively affect real agricultural prices, consistent with the Prebisch–Singer hypothesis and its predecessor, Engel's Law. Energy prices matter most (not surprisingly, given the energy‐intensive nature of agriculture), followed by stock‐to‐use ratios and, to a lesser extent, ex‐change rate movements. The cost of capital affects prices only marginally, probably because it not only influences demand, but also evokes a supply response. The added value of these results lies in that, when examined in tandem and against market fundamentals, they challenge the conclusions from uni‐dimensional approaches that often put disproportionate weight on an individual factor.