The economic consequences of substituting carbon payments for crop subsidies in U.S. agriculture

There is a growing body of literature on the costs of sequestering carbon. However, no studies have examined the interplay between farm commodity programs and carbon sequestration programs. This study investigates two dimensions of the interaction between farm commodity programs and afforestation programs, using a price-endogenous sector model of agriculture in the United States. First, this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation, with and without current farm programs. Second, it examines the welfare, fiscal, and carbon consequences of replacing existing farm subsidies, wholly or in part, with payments for carbon. Two approaches, Hicksian and Marshallian, are investigated. In the first, the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the U.S. agricultural sector no worse off than under existing farm programs. The second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels. Althouth the methodology and data are applied to the United States, the issues addressed are common in a number of developed nations, particularly within the European Union (EU). Adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade-offs involved with second-best policies for replacing farm commodity subsidies with tree planting subsidies.The research reported in this paper was partially funded by the United States Environmental Protection Agency under contract number 68W90077. It does not reflect the official position of that agency. Mention of trade names does not constitute endorsement.     

Opening the Farm Gate to Women? The Gender Gap in U.S. Agriculture

Abstract:

This article provides an empirical analysis of the gender gap for farming in the United States. Using the 2012 U.S. Census of Agriculture we show that farms operated by women earn forty percent less farm income than farms operated by men after controlling for farm and operator characteristics. These findings indicate that farming is one of the most unequal professions in the United States today. Further, we investigate whether three forms of sustainable agriculture improve incomes for women farmers. We find that only farms engaging in Community Supported Agriculture experience a marked decline in the gender income gap.     

Analyses of technical efficiency using SDF and DEA models: evidence from Nepalese agriculture

Alleviation of poverty is a central issue in Nepal. Given the limited stock of land and the infant/unorganized manufacturing sector, increased demand for food has to be satisfied by improving production efficiency. This article examines how this could be achieved. Stochastic distance function and data envelopment analysis models identify the existence of a high degree of technical inefficiency in Nepalese agriculture, suggesting that there is a substantial prospect of increasing agricultural productivity using the existing level of inputs and resources more efficiently. Among the three farm sizes in the data set, medium size farmers achieve a higher technical efficiency than large and small farm sizes, suggesting that productive efficiency can be increased with the encouragement of creating medium size holdings. The observed decreasing returns to scale also implies that productivity gains could be achieved by breaking up of large farms into small family farms. The technical inefficiency model suggests the potential for shifting the production frontier upwards by providing ownership of land, increasing farmers’ education and knowledge, and increasing land quality, including irrigation facilities.     

A dynamic multi-commodity model of the agricultural sector: A regional application in Brazil

This paper develops a dynamic model to analyze the development process in the agricultural sector. Formulated as a recursive linear programming model, it contains several commodities as outputs, farm and regional resource constraints on owned and purchased inputs-including working capital-and several farm sizes. The objective function is assumed to be separable for each farm size and additive for the region and measures for each year the net expected revenues from crop and livestock production less an investment charge. Prices are exogenous. The model is applied to a rapidly developing agricultural region in Southern Brazil and tested for its ability to trace regional farm sector development over a decade. It is then used to analyze the impact of alternative agricultural policies including price and credit subsidies.     

Bioenergy Crop Production in the United States: Potential Quantities, Land Use Changes, and Economic Impacts on the Agricultural Sector

The U.S. Departments of Agriculture and Energyjointly analyzed the economic potential for,and impacts of, large-scale bioenergy cropproduction in the United States. Anagricultural sector model (POLYSYS) wasmodified to include three potential bioenergycrops (switchgrass, hybrid poplar, and willow). At farmgate prices of US $2.44/GJ, anestimated 17 million hectares of bioenergycrops, annually yielding 171 million dry Mg ofbiomass, could potentially be produced at aprofit greater than existing agricultural usesfor the land. The estimate assumes highproductivity management practices are permittedon Conservation Reserve Program lands. Traditional crops prices are estimated toincrease 9 to 14 percent above baseline pricesand farm income increases annually by US $6.0billion above baseline.At farmgate prices of US $1.83/GJ, anestimated 7.9 million hectares of bioenergycrops, annually yielding 55 million dry Mg ofbiomass, could potentially be produced at aprofit greater than existing agricultural usesfor the land. The estimate assumes managementpractices intended to achieve highenvironmental benefits on Conservation ReserveProgram lands. Traditional crops prices areestimated to increase 4 to 9 percent abovebaseline prices and farm income increasesannually by US $2.8 billion above baseline.     

Can Non-point Phosphorus Emissions from Agriculture be Regulated Efficiently Using Input-Output Taxes?

In many parts of Europe and North America, phosphorus loss from cultivated fields is threatening natural ecosystems. Though there are similarities to other non-point agricultural emissions like nitrogen that have been studied extensively, phosphorus is often characterized by the presence of large stocking capacities for phosphorus in farm soils and long time-lags between applications and emission. This makes it important to understand the dynamics of the phosphorus emission problem when designing regulatory systems. Using a model that reflects these dynamics, we evaluate alternative regulatory systems. Depending on the proportions of different types of farms in the agricultural sector, we find that an input-output tax system can be the core element of a close to efficient regulatory policy.     

The implications of the US renewable fuel standard programme for farm structure

We investigate the impact of the 2005 Renewable Fuel Standard (RFS) on farm structure, particularly farm size. We rely on the salience of a new ethanol plant in a farmers’ local neighbourhood to identify the impact of the RFS mandate on these spatially advantaged farms. To control for the nonrandom selection of ethanol production facilities, we utilize a propensity score matching estimator, and to remove impact of farm-level or market shifting unobservables resulting from shifts in commodity prices we employ a difference-in-difference (DD) matching approach. We estimate the treatment effect of an ethanol production facility on farm size prior to the RFS mandate and after the RFS programme. The effect of the RFS policy on farm size is obtained as the difference between these two DD matching estimators. Overall, our results suggest that the RFS programme raised the probability of farm size increase by roughly 12–18%, on average, for farms located within a 30-mile radius of new ethanol plants. In addition, the programme contributed to a net increase in farm size of 25–32%, on average, for those spatially advantaged farms.     

Analyzing the effect of advanced agriculture development policy

This paper broadens the scope of current theoretical studies, divides rural agriculture into two sectors—advanced and traditional, and takes into consideration the land factor and the urban informal sector. Under the assumption that wages in the advanced agricultural sector are higher than in the traditional agricultural sector, this paper analyzes the effect of policies to promote advanced agricultural development with the comparative static method. The main conclusions of this paper are: wage subsidization of the advanced agricultural sector, in addition to having the same economic impact as interest subsidies on the advanced agricultural sector, could also increase the land employment in the advanced agricultural sector and reduce that in the traditional agricultural sector. Therefore, the effect of wage subsidizing policies is stronger than that of interest subsidies, while land rent subsidies for the advanced agricultural sector have the same economic effect as wage subsidies.     

AGRICULTURAL PRICE AND INCOME POLICY: A NEED FOR CHANGE

Agricultural price and income policies operate within a framework established more than 50 years ago. This framework assumes that agriculture is dominated by "family farms," and that the agricultural economy is relatively independent of international and other domestic economic considerations. Yet, the structure of the farm sector today differs greatly from that of 50 or even 20 years ago. The U.S. economy relies on international markets to dispose of 20 to 30 percent of U.S. agricultural output. These changes call for reorientation of U.S. farm policy.     

The effects of macroeconomic factors on South African agriculture

Significant research efforts have been devoted to understanding the effects of macroeconomic factors on the agriculture sector. Analysing the sources of volatility in the industry is critical for designing appropriate policies to stabilize agricultural markets, reduce poverty and increase economic growth. Agriculture is a competitive sector with prices that are more flexible than those in nonagricultural sectors. This article uses annual data over the 1957–2004 period and a vector error-correction model in investigating the dynamic effects of exchange rates, money supply and other macroeconomic variables on the agricultural sector in South Africa. Overall, real exchange rates, interest rates, inflation and money supply (M3) shocks have significant and persistent impacts on agricultural output, prices received by farmers and farm input prices. M3 and interest rate shocks tend to put agriculture in a cost-price squeeze. Agricultural price movements are a source of macroeconomic instability in the country. Real exchange rate shocks shift relative prices in favour of agriculture in the long-run, thereby, boosting farm incomes and accelerating poverty reduction in the country.     

Using GIS-based ecological–economic modeling to evaluate policies affecting agricultural watersheds

This paper has three purposes. The first is to conceptualize agricultural watersheds as complex adaptive human ecosystems that co-produce agricultural goods and ecosystem services. The second is to demonstrate a generalizable framework for the spatial modeling of ecosystem service production in watersheds based on this conceptualization. The third is to examine the policy implications of the analysis conducted using this spatial decision support system (SDSS).Analyses using the SDSS show that restrictions on soil loss to the “tolerance level” (T) cause average farm income to decline by only 4%, a reduction that is nearly eliminated if the Conservation Reserve Program (CRP) is available to farmers as an income-generating alternative. The spatially variable response of farmers to soil loss restrictions and the CRP creates a complex pattern of winners and losers and a markedly different land use pattern and crop mix than occurs without these programs. The land use pattern associated with T restrictions and the CRP yields about 64% lower erosion rates and 43% lower sediment yields than the pattern without T restrictions or CRP. These and other results from the SDSS analysis point out that ecosystem service-based subsidies, such as CRP, improve the joint production of farm income, soil conservation and water quality in agricultural watersheds. These subsidies could perhaps receive greater funding by shifting agricultural subsidies from income supports tied to yield and price as well as other crop-based programs. In this way, public expenditures on agriculture would produce a valuable public benefit in the form of load reductions in a TMDL context, and an augmentation of ecosystem services now in decline in many agricultural watersheds. Further methodological developments now underway using evolutionary algorithms can find near-optimal solutions for farms over time and for landscape patterns over whole watersheds.     

Campaign Contributions and Agricultural Subsidies

This article examines the influence of campaign contributions on agricultural subsidies. Empirical results revealed that rent-seeking works, i.e. contributions, influence agricultural subsidies in the manner they best serve contributors' economic interests. Eliminating campaign contributions would significantly decrease agricultural subsidies, hurt farm groups, benefit consumers and taxpayers, and increase social welfare by approximately $5.5 billion. Although contributions are not the only determinants of agricultural subsidies, investment returns to farm PAC contributors are quite high ($1 in contributions brings about $2,000 in policy transfers). In fact, the results are in sharp contrast to the "truthful contributions" assumption of the Grossman–Helpman model.     

Groundwater balance and conservation under different water pricing and agricultural policy scenarios: A case study of the Hamadan-Bahar plain

Government subsidies for agricultural activities in recent decades have encouraged farmers of Hamadan-Bahar plain to extend the number of wells and irrigated farms, with no consideration of groundwater resource conservation. As a result, the level of the groundwater table has decreased continuously in this area, threatening the life of groundwater aquifer. The objective of the study is to analyze the impacts of irrigation water pricing and agricultural policy scenarios on aquifer conservation by considering the dynamic relations between aquifer groundwater balance and the agriculture sector. For this purpose a combination of simulation and optimization techniques is considered in a dynamic framework. Firstly, dynamic treatments of groundwater and the main factors affecting the balance of studied aquifer are simulated. Then, optimization behaviour of agriculture sector related to farmers' decision-making processes is defined on the time horizon. Thereafter all of the equations are used simultaneously by a non-linear dynamic programming method, which maximize present value of gross margins of agriculture sector subject to groundwater constrains and other input limitations. The analysis of the results indicates that water pricing by itself can considerably reduce the agricultural demand for aquifer groundwater in the Hamadan-Bahar plain.     

The Effect of Off-farm Work on the Intensity of Agricultural Production

Changes in agricultural production methods have been associated with environmental pressure and a loss of natural habitats. This paper explores the extent to which farmer participation in off-farm work (an increasing phenomenon in most developed countries) changes the intensity of agricultural input use focusing, in particular, on fertilizer and crop protection product use. A sample selection model that accounts for both unobserved heterogeneity between farms and the potential simultaneity between farm operations and hours worked off-farm is estimated for 2,419 farms in England and Wales. The econometric evidence indicates that the input intensity of products which have well-established links to environmental damage can increase as well as decrease. The results suggest that that fertilizer intensity may decline as off-farm labor increases while the use of crop protection per hectare increases as off-farm work increases.     

The Welfare and Resouce Allocation Implications of the U.S.Dairy Quotas

This paper examine the welfare and resource allocation implications of the U.S. dairy quotas. A computable general equilibrium model detailing five dairy sectors and nine aggregate sectors is calibrated to a 1989 benchmark of the U.S economy. The model is used to simulate the removal of the U.S.dairy quotas both the with and without a first-best subsidy to maintain a dairy farm output objective. Welfare, production, trade, and employment results are provided. The welfare cost of the U.S dairy quotas ranges from $0.7 to $1.0 billion. The first-best subsidy ranges from $2.0 to $2.3 billion or approximately $1.4 million per full-time equivalent job maintained in the dairy farm sector [F13, Q17]     

On structural change,the social stress of a farming population,and the political economy of farm support

A rationale for providing support to the farm sector in the course of economic development and structural change is a growing gap between the incomes of non‐agricultural workers and the incomes of farmers. Drawing on a model that enables us to analyze the level of social stress experienced by farmers as employment shifts from the farm sector to other sectors, we find that even without an increasing gap between the incomes of non‐agricultural workers and the incomes of farmers, support to farmers might be needed/can be justified. This result arises because under well‐specified conditions, when the size of the farm population decreases, those who remain in farming experience increasing aggregate social stress. The increase is nonlinear: it is modest when the outflow from the farm sector is relatively small or when it is large, and it becomes more significant when the outflow is moderate. This finding can inform policymakers who seek to alleviate the social stress of the farming population as to the timing and intensity of that intervention.     

Costs and benefits of on-farm nature conservation

The costs of on-farm nature conservation is an important issue in Dutch agriculture. As nature is a public good, nature conservation cannot do without subsidies from the government. The question of how much farmers should receive in subsidies in order to keep farms engaged in conservation activities is highly topical. In this article, the questions of how much farmers should receive in subsidies and what other factors motivate or demotivate farmers to participate in on-farm nature conservation are addressed. The study was carried out for a particular region in the northern Netherlands and was initiated by the concerns that farmers organisations had about the level of subsidies for landscape conservation as a major form of nature conservation on dairy farms in this region.In this study, both a normative model and a survey were employed. A normative economic dairy farm model was first used to determine differences in income between a typical farm involved in landscape conservation and a typical farm not involved in landscape conservation. Results from the model show that the farm involved in conservation earned a lower income than the farm not involved in conservation. This was due to the first farmer's smaller scale, lower intensity and lower productivity. The lower income, however, was compensated for by conservation subsidies. Next, a survey concerning on-farm nature conservation in general was carried out among the farmers in this area. From the survey results, it appeared that the majority of the respondents were satisfied, at least to some extent, with the level of subsidies for on-farm nature conservation. Moreover, the survey also revealed that the farmers' commitment to their natural environment strongly motivates farmers to get involved in on-farm nature conservation schemes, whereas the uncertainty about regulations and the feeling of being controlled too much demotivate them.The results show the complementarity of the two methods. The findings of the survey confirm the main findings of the normative model calculations, and, moreover, the survey reveals that in addition to monetary compensation, other factors play a role for farmers in the decision to get involved in on-farm nature conservation.     

Government payments,market profits and structural change in agriculture

I analyze the interaction of two institutions, markets and public policies, and their effect on structural change in agriculture. More specifically, I consider how subsidies affect functioning of input and output markets, and the selection of business strategies within them. The main hypothesis is that subsidies affect these markets differently, and that allows rent-seeking that hinders the overall productivity of the sector. I apply a replicator dynamics model for the task. I test my hypothesis with the EU’s 2003 CAP reform. The data is comprehensive microdata of Finnish grain and oilseed farms for years the 2004–2013. In order to examine distributional level shifts, I use quantile regression techniques. I find that the policy incentives have directed sectoral change more strongly than market incentives and have thus significantly affected production decisions. The subsidies have also attenuated the market signals and therefore increased sectoral inefficiency. The reform that aimed to improve market orientation has had little effect. The reform has affected structural change in input and output markets differently. While land use adjustment has become more rigid for all the farms, especially the more market oriented ones have been able to exploit increased output market flexibility. However, the negative effects are more prominent in total and the net effect of the reform was negative.     

Did the Thai rice-pledging programme improve the economic performance and viability of rice farming?

This article evaluates impacts of the rice-pledging programme on the economic performance and viability of rice farming in Thailand. It also investigates whether the effects of the programme are heterogeneous across different farm types using the propensity score matching technique to address the self-selection bias in the farm-level data set. We found that the programme enhanced the economic performance less than hoped for. Overall, the programme was estimated to improve the net direct farm income for participating farms by $175.12–$194.82 per hectare. Taking into account the heterogeneous effects of the programme across farm types, we calculated that the greatest effects may be realized by farmers within the small farms subsample, at $404.41–$439.85 per hectare, but only $139.80–$213.36 per hectare for midsize farms, and $138.82–$173.34 per hectare for large farms. With regard to the economic viability of the programme, we discovered that it had an insignificant effect on farm modernization investment initiatives. Thus, future strategies incorporated into the programme that better control increases in production costs, improve small farmers’ access to the programme and require participating farms to spend a portion of the money received on farm modernization may improve long-run benefits of the programme.     

Income convergence among U.S. states: cross‐sectional and time series evidence

We perform convergence tests on the U.S. states for per capita income from 1930 to 2009. Cross‐sectional tests support overall σ‐convergence and β‐convergence but may not hold true for the last three decades. Time series tests suggest that about half of the states exhibit stochastic convergence and of these all are also β‐converging. Probit regressions reveal that the likelihood a state is converging is a function of changing capital to labour ratios, the size of the agricultural sector, and levels of taxation and tax revenue. Regional disparities in convergence remain among the southern and midwestern states.