The effects of current income and expected change in future income on stated preferences for environmental improvements

We formulate and test the hypothesis that expectations regarding changes in future income influences the WTP for environmental goods. For valuation of environmental goods in forests and other habitats in Denmark, we find that both current income and expected changes in future income are significant determinants for preferences. The effect of income on WTP seems to be caused by changes in preferences for environmental attributes rather than by marginal utility of income. The results suggest that to evaluate the distributional impacts of environmental improvements, researchers need a better measure of expected future consumption options than current income.     

Consistent Estimation of a Censored Demand System and Welfare Analysis: The 2012 VAT Reform in Spain

This paper analyses the effects that the 2012 VAT reform in Spain had on households’ welfare, focusing on a major expenditure group: food and non‐alcoholic beverages. Households’ demands are modeled as a two‐stage Quadratic Almost Ideal Demand System, which is then estimated by means of a consistent two‐step estimator introduced in Tauchmann ( 2010 ) and not previously used in studies of this type. This procedure allows consistent imposition of the traditional parameter restrictions that utility maximisation requires in the context of a censored model. Our results show that the welfare loss and the increment in the tax bill increase with income. We also show that expenditure on food and non‐alcoholic beverages grows less than proportionately with income. Consequently, households with lower income experience a greater welfare loss relative to their income levels. In short, the 2012 VAT reform in Spain, focusing on this expenditure group, can be considered as regressive.     

农户低碳化种植决策行为研究——基于河北省的调查数据

发展低碳农业是我国农业现代化的本质要求和必由之路,低碳种植是低碳农业的重要组成部分。我国低碳农业的发展并不尽如人意,其原因之一在于大多数农户在种植过程中仍然采用常规的农业种植方式。为研究农户低碳化种植的决策行为,该文以效用最大化理论为基础,建立了农户选择低碳化种植行为的效用函数模型,从理论上证明农户采取低碳化种植行为是一种有限理性行为,农户在选择种植方式时遵循了效用最大化原则,并结合前人研究推导了农业种植收入、农业种植行为以及种植预期对农户选择低碳化种植决策的影响趋势。根据对河北邯郸、保定和张家口3市360家农户的调查数据,运用Logit模型对调查数据进行计量分析。研究结果表明,对农户低碳化种植行为选择影响显著的因素有种植业收入比重、预期收益、现行种植行为、农户受教育水平、农业劳动力人数、政府政策以及同伴的种植行为。在此研究结论基础上,该文提出了促进低碳农业发展的相关建议。     

Are People Ashamed of Paying with Food Stamps?

We evaluate the claim that marginal ‘welfare stigma’causes a dollar of food to provide less utility if bought with food stamps rather than cash, and that this explains why, in the United States, the marginal propensity to consume food out of food stamps is larger than that out of income. This hypothesis has been advanced to explain the so‐called ‘cash‐out puzzle’: the empirical observation that the marginal propensity to consume food out of food stamps is much higher than that out of income, even for households who spend some cash income on food. We develop a theoretical model to identify the restrictions imposed by the hypothesis that the puzzle is indeed caused by such stigma. Using data from San Diego County, we find that two of the three predictions of the marginal stigma model are violated. These results cast serious doubt on the marginal stigma hypothesis.     

Assessing the Impact of Alternative Water Pricing Schemes on Income Distribution

The reform of water pricing policies may represent an effective instrument for enhancing the efficient use of water resource. However, policy makers fear that a change in the pricing methods may cause income loss for some farmers, and that this income inequality may generate public discontent and policy inertia. The aim of this paper was to compare some pricing methods in order to measure their effects on income distribution. The analysis focuses on the income distribution among different types of farms, and the income distribution between different social groups (landowners, capitalists and workers) in the short term. A linear programing model based on expected utility theory is used to take into account the effect of commodity prices and rainfall variability, which are among the most relevant factors affecting farmers’ income. According to the findings, water pricing schemes do not affect the income distribution among farm types, although a significant impact emerges on the distribution among social groups, and in particular on the wages of temporary workers.     

Modeling household behavior in developing countries: discussion

A large and growing body of literature has examined how agricultural households cope with risk. Much of the work has focused on which types of households are better able to smooth consumption, testing whether households with more resources and greater access to income-smoothing institutions, such as credit markets or well-functioning labor markets exhibit greater consumption smoothing. However, income shocks may have different effects upon different individuals within households, and differences in individual ability to smooth income or consumption may have welfare consequences which go beyond foregone income. The development of collective household models challenges the assumption that individuals within households maximize a single utility function. The assumption of income pooling has also been rejected in a growing body of empirical research on intrahousehold resource allocation. However, research on risk-pooling within households and differences in individual abilities to smooth consumption is relatively new. Selected papers are discussed.     

Savings and technology choice for risk averse farmers

Farmers in developing countries have limited opportunities for borrowing to even out variability associated with risky farm income, but they can save. A dynamic programming model of savings is presented in the current paper which examines optimal savings strategies for farmers, using a case study of integrated rice–shrimp farms in Vietnam. It is shown that when savings are accounted for, the expected utility ranking of different risky farm choices may not differ that much between farmers with different levels of risk aversion.     

Nonpecuniary Benefits to Farming: Implications for Supply Response to Decoupled Payments

We develop a household model wherein farmers allocate labor to maximize utility from leisure, consumption, and nonpecuniary benefits from farming. The model shows that farmers with decreasing marginal utility of income respond to higher decoupled payments by decreasing off-farm labor and increasing farm labor, resulting in greater agricultural output. We then estimate the difference between farm and off-farm returns to labor using data from three nationally representative farm household surveys. The finding of a large on-farm/off-farm wage differential provides compelling evidence of substantial nonpecuniary benefits from farming.     

Effect of yield and price risk on conversion from conventional to organic farming*

Although the benefits of organic farming are already well known, the conversion to organic farming does not proceed as the Dutch government expected. In order to investigate the conversion decisions of Dutch arable farms, a discrete stochastic dynamic utility‐efficient programming (DUEP) model is developed with special attention for yield and price risk of conventional, conversion and organic crops. The model maximizes the expected utility of the farmer depending on the farmer’s risk attitude. The DUEP model is an extension of a dynamic linear programming model that maximized the labour income of conversion from conventional to organic farming over a 10 year planning horizon. The DUEP model was used to model a typical farm for the central clay region in the Netherlands. The results show that for a risk‐neutral farmer it is optimal to convert to organic farming. However, for a more risk‐averse farmer it is only optimal to fully convert if policy incentives are applied such as taxes on pesticides or subsidies on conversion, or if the market for the organic products becomes more stable.     

国有林权制度改革后承包户投资及收入调查

根据黑龙江省伊春市参与国有林权制度改革试点的118个承包户实地调查样本数据,对承包户的初始投资、追加投资以及家庭收入进行了统计性描述。研究结果表明:承包户的投资能力不强;承包林地的面积和离家距离对承包户的追加投资有影响;短期内承包户的收入仍然依赖于林业局的工资,而承包户林下经济投资的收益已有所显现。     

Should farmers invest in financial assets as a risk management strategy? Some evidence from New Zealand*

This study explores the potential for risk reduction by New Zealand farmers through the diversification of their farm asset portfolios to include financial investments such as ordinary industrial shares, government bonds and bank bills. Low correlations between rates of return on farm and these financial assets suggest that significant reduction of income variability might follow their inclusion in farmers’ portfolios. Stochastic efficiency analysis is used to analyse alternative portfolios of ordinary shares, government bonds and bank bills and New Zealand farmland, using coefficients of absolute risk aversion derived from a negative exponential utility function. The results suggest that those farmers showing high degrees of risk aversion would gain utility by including financial assets in their portfolios. Deregulation of the New Zealand economy in the 1980s appeared to reduce the potential gains from diversification. Bonds rather than ordinary shares are the main contributors to portfolios which maximise utility for individuals classified as ‘somewhat’ risk averse.     

THE DEMAND FOR MEAT — AN EXAMPLE OF AN INCOMPLETE COMMODITY DEMAND SYSTEM*

Equations describing the demand for beef and veal, mutton, lamb, pork and chicken are estimated using the full information maximum likelihood estimator. Elasticity estimates are presented and the double logarithmic model is compared with a demand system which is derived from the indirect translog utility function. Estimates of the direct price and income elasticities are not particularly sensitive to model specification but the estimated cross-price elasticities are sensitive to the choice of functional form. The results indicate that the double logarithmic specification may be less satisfactory than the alternative presented in cases where restrictions on the parameters are imposed during estimation.     

SENSITIVITY OF FARM PLANS UNDER RISK-AVERSE BEHAVIOUR: A NOTE ON THE ENVIRONMENTAL IMPLICATIONS

This study demonstrates that the intensity of farm-level land use can be extremely sensitive to minor reductions in expected farm income when the risk-averse farmer makes utility maximising decisions. The study uses directly elicited utility functions for farmers in the North of England in conjunction with MOTAD generated E, V frontiers. The results imply that instability encourages the use of less intensive farming methods and therefore could actually assist the achievement of environmental policy goals.     

Nutrition Transition and Changing Food Preferences in India

We present empirical evidence on how changes in food preferences have contributed to nutrition transition, where the dietary pattern of households shifts away from traditional staples. Using household-level time series cross-section survey data for India, we estimate time varying demand elasticities, revealing evidence of the declining importance of cereals in Indian household diets. The estimates show that Indian demand for cereals has become more income inelastic and price elastic. We also find that cereals are a substitute rather than a complement to animal products in household diets. Since changes in elasticities can only be attributed to variation in utility parameters, this indicates that cereals are losing favour with Indian households. These findings have implications for Indian food policy design and implementation.     

Economics of erosion-control and seed-fertilizer technologies for hillside farming in Honduras

With population growth still at very high rates and large-scale commercial farmers and cattle ranchers owning much of the more fertile valley land, small-scale farmers are concentrated on increasingly marginal, steeply sloping hillsides in Central America. The continuing soil erosion and land degradation in these low-input staple crop production hillside farming systems lead many to be pessimistic about increasing the agricultural incomes of these farmers. However, this study shows that the appropriate combination of improved technologies and agricultural policy or alternative production diversification strategies can improve the incomes of small-scale hillside farmers in southern Honduras by over 50%. The technology components considered are stone walls and ditches combined with living tree barriers to prevent erosion of the hillsides, and a package of improved sorghum seed, seed treatment, and modest doses of nitrogenous fertilizer. A whole-farm mathematical programming framework is used to determine the potential farm-level income effects of the soil-conservation and seed-fertilizer technologies. The main conclusion is that erosion-control devices and yield-increasing crop varieties and fertilizer are an effective technology introduction strategy for the erosion-prone hillside landholdings found in many areas of Central America. If policy actions or diversification strategies for disposal of surplus grain are found which are effective in reducing the risk of low income from cereal price reductions in high-production years, adoption of the improved technologies is shown to be profitable for small-scale farmers. Another benefit not explicitly considered would be to slow the very rapid growth of urban poverty in these countries. Sensitivity analysis results indicated that neither risk aversion nor the increased availability of crop land or initial cash have any substantial effects on the predicted adoption level of the improved technologies, or on their income impacts for these farmers.     

Heterogeneity in the Cost Structure of Water and Sanitation Services: A Cross-country Comparison of Conditions for Scale Economies

The main purpose of this article is to compare the cost structure of water utilities across a set of 14 countries with different levels of economic development. As far as is known, the cross-country perspective is novel in this literature. This article first provides new measures of returns to scale in the water and sanitation sector for a set of countries, most of them from the developing world. It is then shown that the probability of a utility operating under decreasing, constant, or increasing returns to scale depends not only on its characteristics (the volume of water produced in particular), but also on the country's level of economic development (gross national income) and business environment as measured by investor protection, the cost of enforcing contracts and perceptions of corruption.     

ETHICS AND EXTERNALITIES: AGRICULTURAL STEWARDSHIP AND OTHER BEHAVIOUR: PRESIDENTIAL ADDRESS

Neo classical micro-economic theory of the firm and household rests on the foundations of profit maximising and utility maximising behaviour respectively. This paper explores the issue of whether market efficiency can be improved when economic agents' behaviour is motivated by ethical objectives such as fairness and altruism. In particular the paper examines agricultural stewardship as an ethically motivated form of behaviour, which is profit sacrificing, but which improves economic efficiency by reducing environmental externalities. The paper also reiterates the limitations of Pareto optimality as a criterion of economic welfare because its rejection of interpersonal welfare comparisons rules out ethical considerations of income and wealth distribution.     

RAISING FARM INCOMES: TRANSFER PAYMENTS VERSUS OUTPUT RESTRICTIONS*

On the basis of approximate calculations for 1969-73, an increase in Canadian net farm income of some 20 percent would have been needed for parity between labour income in the farm and non-farm sectors. Demand theory indicates a lower utility loss in the non-farm sector if an income shift to the farm sector is made by direct taxation and transfer payments rather than through higher prices resulting from output restrictions. However, if there are decreasing returns to purchased inputs in agriculture, the higher prices and consumer surplus foregone through output restrictions do not necessarily constitute a greater burden than direct transfer payments.
D'après des calculs approximatifs pour les années 1969-73, une augmentation de 20% dans le revenu canadien net-ferme, aurait été nécessaire pour atteindre parité entre le revenu de travail ferme et le non-ferme. La théorie de demande indique une perte ďatilité moins sévère dans le secteur non-ferme, si une augmentation de revenu dans le secteur ferme est faite par I'impôt direct et par le transfert des paiements, plutôt que par des prix plus hauls qui sont le résultat des restrictions sur le rendement. Cependant, si les remises des consommations achetées en agriculture diminuent, les plus hauts prix et le surplus perdu du consommateur ne constitueront pas nécessairement un coút plus élévi que le transfert direct des paiements.     

Rural household incomes and land grabbing in Cambodia

This paper empirically quantifies environmentally augmented rural household incomes in Cambodia and analyzes how economic land concessions (ELCs) affect such incomes. Data is derived from a structured survey of 600 randomly selected households in 15 villages in three study sites in Cambodia, where local livelihoods are highly reliant on access to land and natural resources, supported by qualitative data from focus group discussions. Gini coefficient decomposition, multiple regression models, and propensity score matching (PSM) models were employed to analyze the composition of income portfolios, determinants of major income sources, and the impacts of land grabbing on incomes. Results documented high reliance on environmental income (32–35% of total household income) and farm income (51–53%) across income quartiles; demonstrated the variation in product composition across quartiles and the contribution of each major product to income inequality; and identified the main household characteristics influencing absolute and relative incomes. ELCs were found to consistently have negative impacts on household total income, environmental income, size of available cultivable land and livestock holdings, and increasing the distance to forests. The total household annual income subjects to ELCs were estimated to decrease by 15–19%. While providing some employment opportunities, we find no evidence of positive income effects of ELCs on households in the areas where ELCs are located.     

RISK ATTITUDES AMONGST AUSTRALIAN FARMERS

A procedure for the measurement of risk attitudes is developed and applied. The data for the analysis were obtained from a survey in which 201 farmers throughout Australia were asked to provide points of indifference between sure amounts of income and risky prospects. Although the conclusions from this pilot study are of a tentative nature, it is suggested that risk aversion is the most prevalent risk attitude in the agricultural sector. However, the average degree of risk aversion is relatively small and, in an expected utility context, farmers gave a wide variety of responses. The latter result highlights the need to consider the size distribution of risk attitudes in economic modelling. Influences of socioeconomic and other variables on risk attitudes are examined. The results, when considered jointly with other studies, emphasise the desirability of further research into the determination of risk attitudes.