Do subsidies cause a less competitive milk market in China?

After 2008, China dairy industry has experienced a consolidation supported by the government mainly for the reason of food safety. Subsidies are one of the tools to shape a concentrated market with goals of reducing regulation cost and accomplishing quality control. This gives a serious concern that subsidies would generate a less competitive dairy industry. We construct a parametric model and use the firm‐level panel data, specifically the top eight dairy firms, to test if government subsidies strengthen the market power in the dairy industry. Our empirical results indicate government subsidies have a negative impact on the Lerner index for the top privately owned firms, but no significant effect on state‐controlled ones after controlling for advertising, time trend, and proprietorship. It is possible that the subsidies give more room for private firms to increase the scale or suppress the price, which eventually reduces the market power and benefits dairy customers in the downstream.     

Public Investment and Industry Incentives in Life-Science Research

Life-science research has shifted rapidly from the public to the private sector, raising questions about government's remaining role. We shed light on the issue by employing a dynamic investment-response model to examine the public's impact on industry life-science research effort and success. We find that government expenditures in both basic biological research and agricultural and medical science create substantial spillovers for private firms. The spillovers are, unfortunately, partly nullified by government competition for scarce research inputs. Yet even after accounting for such competition, public investment has been strongly complementary to private investment. Indeed, opportunities created through public research are the principal source of growth in industry life sciences.     

The impact of seed industry concentration on innovation: a study of US biotech market leaders

Agricultural research drives increases in agricultural productivity, and the number of private agricultural input firms has been declining. The empirical relationship between the number of firms doing applied biotechnology crop research and the amount of research output they produce is investigated in a research profit function model. Increases in seed industry concentration have reduced biotech research intensity in the United States in the 1990s. Concentration and research are simultaneously determined and are influenced by the appropriability of research results and the state of technological opportunity.     

Public Research Policy for Today's Agricultural Biotech Research Industry

While the public sector has historically played a very significant role in the direct provision of agricultural research, the appropriate role of government in the future is no longer apparent in a world with intellectual property rights (IPRs) and a concentrated privatized biotech research industry. This study develops a search/imperfect competition framework to examine the public role. The analysis shows that private firms have inadequate incentives to invest in research for varietal improvement relative to the social optimum even with completely enforceable IPRs. A government subsidy on research output can efficiently increase the amount of applied research to the socially optimal point. Government subsidy of the research cost can have the same effect on research and development expenditure. Expanding direct applied public research increases social welfare but cannot achieve a social optimum, as it reduces the already limited incentives for private firms to invest. Finally, in situations where basic research is underprovided, government should address these market failures as part of an optimal research policy. Overall, the analysis suggests that there is a role for public support of applied research, but this role is no longer direct public involvement in applied research where IPRs are well established.     

Modeling differentiated quality standards in the agri-food sector: the case of meat trade in the enlarged EU

Quality standards play an increasingly important role in international agri-food trade, and their functioning as nontariff barriers to trade is widely discussed. We argue that food quality standards imposed by importing countries are more than just border measures and can have profound effects on the market structure of the exporting industry, thereby significantly influencing the supply response. We develop a stylized oligopoly model that accounts for compliance costs (fixed and variable) and investigate alternative policy options to explore different mechanisms an importing county may use to enhance the quality of its imports. The model explicitly recognizes the coexistence of complying and noncomplying firms, which is a situation often found in low-income countries where a small modern export-oriented segment invests in meeting foreign quality standards. We use the adjustment of the Polish meat sector to the tight EU food quality standards as an empirical example. The simulations show that a subsidy scheme can promote compliance with standards and can contribute to an upgrade of the industry in the exporting country, but its marginal effectiveness is diminishing.     

Food Safety and Private International Law

Abstract

One response to rising consumer concerns pertaining to food safety has been private industry and public sector initiatives to put in place traceability systems. One of the objectives of traceability systems is to enhance the deterrence role played by legal liability. When supply chains cross international boundaries, private international law governs liability. This paper explores the relationship between food safety, traceability, legal liability and private international law with the interface of Canadian and US law as the example. The conclusion is that, even when legal systems have a similar basis and governments cooperate in enforcement, the complexity of private international law will inhibit the role of traceability and liability in raising food safety standards.     

Credence Good Labeling: The Efficiency and Distributional Implications of Several Policy Approaches

A model of vertical product differentiation is used to analyze the labeling of credence goods, focusing on the manner by which quality is communicated. The results indicate that firms prefer private labeling options. In addition, firms may hire private certifiers as well as paying for mandated government labels when the government's quality benchmark substantially deviates from firms' private quality choices. The average consumer prefers a mandatory, discrete label with a high-quality standard while poor consumers prefer a mandatory, discrete label with a low standard.     

Effects of litigation under the Endangered Species Act on forest firm values

The Endangered Species Act (ESA) has been a source of litigation and subject to court interpretation during the past several decades. In this study, event analysis was employed to examine the impact of six court decisions related to the ESA on the financial performance of U.S. forest products firms. The finding of abnormal returns revealed that all six events generated the expected positive or negative returns, and among them, four were statistically significant. Changes in systematic risk reflected the reaction of the stock market to the verdict announcements. Programs designed for habitat conservation can be implemented to compensate private landowners or firms for costs associated with protecting species on private forestlands.     

The Crowding Effects of Basic and Applied Research: A Theoretical and Empirical Analysis of an Agricultural Biotech Industry

Game theory is used to examine the incentives for private firms to fund applied research to improve differentiated crop varieties sold to compete with a public generic variety. We distinguish between applied research, modeled as a stochastic search process, and basic research, which improves applied research productivity. Propositions derived from the theoretical model are tested using empirical evidence from the canola crop research industry. The results show consistency between the analytical findings and the econometric results, supporting the validity of the framework and underlining the need to disaggregate the crowding effects of basic and applied public research.     

Price floors and technical inefficiency in India's sugar processing industry

In India, cane is processed into sugar by cooperatives, public enterprises, and private (for‐profit) firms. The Indian government sets a unique floor price for each processor that is increasing in the firm's effectiveness in converting cane into sugar. The floor price binds for public and private firms but not for cooperatives, which rebate profits to members. We argue that this price floor policy creates a disincentive for private and public firms to be technically efficient in converting cane to sugar. In support of this hypothesis an analysis of 593 Indian sugar factories from 1992 to 2007 reveals statistically significant differences in technical efficiency, with cooperatives being the most efficient and public firms least efficient. We estimate welfare losses due to the technical inefficiency attributable to the price‐floor policy and argue that it can be eliminated by enacting policy to base price floors upon quality of the cane input received by a factory.     

农民工需求变动的影响因素及其差异性的实证分析——基于用工企业的调研数据

本文运用广东省和江西省2008—2010年189家用工企业的调研数据,通过建立Panel Data模型,从企业视角实证分析了农民工需求的影响因素及其差异性。研究表明,政府给予企业的优惠政策、企业销售收入对农民工需求的影响为正,而企业技术进步对农民工需求的影响为负。从企业不同市场导向、不同所有制结构两个角度对农民工需求的影响因素进行差异性分析表明,与国内市场导向型企业相比,出口导向型企业的年销售收入越高,对农民工需求的促进作用会更强;相对于私营企业或外资企业而言,政府给予其他所有制企业的优惠政策对促进农民工需求发挥的作用会更大。     

Economic Incentives for Firms to Implement Enhanced Food Safety Controls: Case of the Canadian Red Meat and Poultry Processing Sector

This study assesses quantitatively the economic incentives for firms to adopt food safety controls and the potential impact of a number of firm- and market-specific characteristics on this behavior, focusing on the red meat and poultry processing sector in Canada. The results suggest that market-based (private) incentives have a greater impact on the food safety responsiveness of firms in this sector than government regulatory actions. This creates challenges for regulators in defining policy instruments that promote greater levels of food safety control in food processing sectors rather than constraining firms from taking initiatives that exceed regulatory requirements.     

Winners and losers from food industry policy: An application to Danish food industry firms

Policy impacts on food industry firms are investigated. A new approach is presented for the analysis of food industry policies that focuses on food industry firms. Data from a survey of Danish firms in 2003-2004 are used to define and construct tables of winners and losers from 30 regulatory areas. Two forms of statistical test are employed in a grid-search to identify association between regulatory areas, types of firms, and patterns of winning and losing. Results indicate that the type of firm, rather than the policy instrument, determines patterns of winning and losing. Upstream and downstream ownership of assets by food industry firms, and their trade orientation, are shown to be the most important variables. For several policy areas the pattern of winning and losing is found not to be associated with any specific firm types, which indicates that their impact is neutral across all types of firms studied. Firm size was found to be poorly associated with firms' capacity to win and lose from several policies involving high-investment compliance.     

Melitz Meets Milk: The Impact of Quota Abolition on EU Dairy Export Competitiveness

Previous studies of EU milk quota abolition usually assume perfect competition (PC) in the dairy industry, despite evidence to the contrary. We use a global computable general equilibrium framework with an imperfectly competitive (IC) model variant, which offers insights into structural change (i.e. scale of output, firm entry/exit) and varietal diversity in the dairy industry. A heterogeneous‐firm Melitz extension enriches our analysis by endogenising the decision‐making process of domestic firms when exporting (or not) to specific foreign markets. The results from a PC CGE model variant are found to be consistent with respected market outlooks and official data. Furthermore, PC and IC variants generate broadly similar trends – a result corroborated in a previous study of Italian dairy firms. Our IC model prediction of a ‘shakeout’ among EU dairy firms is tentatively supported by actual observations. Finally, as an industry characterised by significant product innovation, increased extra‐EU export orientation by remaining dairy firms increases varietal choice, which further boosts EU dairy exports compared with the PC model variant.     

Why do farmers behave as they do? Understanding compliance with rural, agricultural, and food attribute standards

Agricultural production experiences a shift in underlying institutions during the last years., Importance of private stakeholders like retailers, processors, consumers as well as tax payers is, emerging. Eligibility for single farm payments and marketing of products is linked to compliance with, diverse codes of practice and standards. Voluntary certification schemes are not only relevant with, respect to agriculture's traditional activity (i.e. food production), but is also highly relevant in case of, rural policies. Examples are the EU's agri-environmental schemes, aimed at preserving biodiversity, landscape elements, etc., which are characterized by voluntary participation and the contractual, commitment to apply certain standards. However, these relationships are highly characterized by, information asymmetries. Economic literature offers several approaches to analyse similar relations. The classical approach bases on the assumption of utility maximising agents that will comply with, rules as long as the net utility of compliance will be higher than the net utility of an offence. Recent, evidence challenges this result. Experiments show that people behave more honest than the classical, deterrence model predicts. Main objective of the paper is to compare the various approaches to explain, compliant behaviour. Additionally, an outlook for empirical applications of the theoretical framework, developed here is given to motivate further research. However, our outlook shows that the selection of, appropriate variables to analyse compliance empirically is open to debate.     

Chinese investment in the Brazilian soybean sector: Navigating relations of private governance

This paper examines how Chinese agribusiness firms are engaging with established systems of private governance in the Brazilian soybean sector and how that engagement is variously accommodated, contested, and configured by local realities that reflect the uneven history of transnational agribusiness development across the Brazilian agro‐export region. Using qualitative data collected at three research sites that represent different historical moments in the Brazilian agro‐export region (Mato Grosso, Goiás, and Bahia), the paper argues that the social structures underlying the particular agrarian histories of these three subregions create unique contexts Chinese firms must navigate, which in turn shapes their engagement with the private agribusiness regime across space. Although the private agribusiness regime is often portrayed as a top‐down system of governance that subjugates the polity to the demands of capital, this framing neglects to understand how that system of power is contested, negotiated, and reshaped on the ground. These three cases serve to historicize the uneven penetration of Chinese firms across the Brazilian soybean sector.     

Endogenous institutional innovation and agroindustrialization on the Peruvian coast

This paper presents an analysis of endogenous institutional innovations that have recently emerged in the agroindustrial zone of Chincha, on the coast of Peru. These innovations include: (1) contracts between agroindustrial firms and large farmers, introduced by the firms themselves to assure timely delivery and compliance with strict requirements implied by the emerging demanding quality and safety standards for agro‐export of processed asparagus; (2) management services exchanged for labor supervision and land collateral in share tenancy contracts between a management company and “farmer companies” of small cotton farmers. These contracts introduced by the management company illustrate those described theoretically by Eswaran and Kotwal [Am. Econ. Rev. 75 (3), 352–367]. The nature and importance of these institutional changes are twofold: (1) They were induced institutional innovations driven by the requirements of agroindustrialization itself. (2) Together they had ambiguous employment and income impacts (tending to the negative). On the one hand, the emergence of asparagus and firm‐farm contracts reduced employment through exclusion of small farms and shifts to capital‐intensive crops. On the other hand, the reinforcement of smallholder cotton and the emergence of farmer companies increased employment and income of smallholders. The institutional innovation allowed them to reduce risk and increase profits and thus access some of the benefits of agroindustrialization and globalization. While processing firm‐farm contracts are common in Peru, as is the presence of NGOs bringing subsidized credit, the private management firm innovation is rare and new in Peru and apparently also in the region, and of great interest. In fact, policymakers and NGOs have recently discovered that this innovation is taking place and are asking hard questions about whether this innovation can and will be diffused. The interest in the private for‐profit institutional change is sharpened by growing doubts about how economically sustainable and widespread a response NGO help can be to small farmers in maintaining their participation in income‐enhancing agroindustrialization. Moreover, with changes in land laws and markets the fluidity of the situation is apparent, with agroindustrial firms even starting to ask themselves whether contracts with large farms are necessary and best.     

Cross-licensing agreements in presence of technological improvements

This study investigates the relationship between technologies that firms expect to achieve after cross-licensing (CL) and their incentives for signing CL agreements in a multiproduct-firm setting. Results indicate that if markets are bounded substantial technological improvements that result in removal of firms’ current products from the market may in fact reduce firms’ incentives to negotiate a CL deal. This may also give firms an incentive to agree upon a tacit collusion by which they limit the utilization of CL technologies. However, when markets are unbounded, the prospect of capturing new markets and charging royalty fees can significantly increase firms’ incentives for CL. The rationale behind our modeling assumptions is discussed using example from agriculture biotechnology industry.     

Unpacking Indonesia’s independent oil palm smallholders: An actor-disaggregated approach to identifying environmental and social performance challenges

Processes of globalization have generated new opportunities for smallholders to participate in profitable global agro-commodity markets. This participation however is increasingly being shaped by differentiated capabilities to comply with emerging public and private quality and safety standards. The dynamics within Indonesia’s oil palm sector illustrate well the types of competitive challenges smallholders face in their integration into global agro-commodity chains. Because of public concern over the poor social and environmental performance of the sector, many governments, companies and consumers are attempting to clean up the value chain through self-regulatory commitments, certification and public regulation. As a result, many of Indonesia’s oil palm smallholders face compliance barriers due to informality and poor production practices, and threaten to become alienated from formal markets, which could in turn lead to a bifurcation of the oil palm sector. Recognizing that many oil palm smallholders lack compliance capacity, myriad public and private actors have begun designing initiatives to address compliance barriers and enhance smallholder competitiveness. However, failure to properly account for the heterogeneity of the smallholder oil palm sector will undermine the effectiveness and scalability of such initiatives. By developing a typology of independent smallholder oil palm farmers in Rokan Hulu district, Riau province, this article reveals the wide diversity of actors that compose Indonesia’s smallholder oil palm economy, the types of compliance barriers they face and the sustainable development challenges they pose. In doing so, this article illustrates how global agro-commodity chains can drive agrarian differentiation and offer new insights into the complex dynamics of agricultural frontier expansion.