AgriStability with Catastrophic Price Risk for Cow-Calf Producers

AgriStability is the primary Canadian agricultural risk management program. Recent experience with bovine spongiform encephalopathy (BSE) in the cattle sector demonstrated that output prices are susceptible to both “normal” risk and sudden, “catastrophic” declines. This paper evaluates the AgriStability program for cow-calf producers when there is potential for catastrophic price risk. A simulation model is developed. Under a base case scenario, when there is no catastrophic price risk, AgriStability behaves more like an income support program than a risk management tool. Risk-neutral producers see a 12.1% increase in certainty equivalent wealth compared to 12.5% for moderately risk-averse producers. Introducing catastrophic price risk increases risk-averse producers’ expected benefits to 21.8%. Actuarially fair program premiums and implied subsidies are also estimated. These results demonstrate that AgriStability is highly subsidized. Finally, benefits from supplementary catastrophic revenue insurance are calculated and discussed, along with several additional structural features of the program. Agri-stabilité constitue le principal programme canadien de gestion des risques en agriculture. L'encéphalopathie spongiforme bovine qui a frappé le secteur de l’élevage bovin a démontré que les prix des extrants sont exposés à des risques « normaux » et à des chutes soudaines et « catastrophiques ». Le présent article évalue le programme Agri-stabilité dans le cas des producteurs vache-veau (veaux d’embouche) lorsqu’un potentiel de risque de prix catastrophique existe. Nous avons élaboré un modèle de simulation. Dans le cadre d’un scénario de référence, lorsqu’il n’existe pas de risque de prix catastrophique, le programme Agri-stabilité ressemble davantage à un programme de soutien du revenu qu’à un outil de gestion des risques. Dans le cas des producteurs indifférents aux risques, l’équivalent certain de la richesse aléatoire est supérieur de 12,1 % comparativement à 12,5 % dans le cas des producteurs modérément risquophobes. L'introduction de risque de prix catastrophique augmente les bénéfices espérés des producteurs risquophobes de 21,8 %. Nous avons également estimé ce que représentent les indemnités actuariellement justes ainsi que les subventions implicites. Les résultats ont montré que le programme Agri-stabilité est très subventionné. Finalement, nous avons examiné et calculé les indemnités tirées d’une assurance-revenu supplémentaire en cas de risque catastrophique et nous avons aussi analysé plusieurs autres caractéristiques structurelles du programme.     

Cash flows and policyholder behaviour in the semi-Markov life insurance setup

Within the setup of a semi-Markov process in a finite state space, we consider a life insurance contract. First, without the modelling of policyholder behaviour, we show how to calculate the expected cash flow associated with future payments, and to that end we present a version of Kolmogorov’s forward integro-differential equation. The semi-Markov model is then extended to include modelling of surrender and free policy behaviour, and the main result is a modification of Kolmogorov’s forward integro-differential equation, such that the cash flow can be calculated without significantly more complexity than the cash flow without policyholder modelling. The result is also demonstrated for the traditional Markov case where there is no duration dependence, and numerical examples are studied.     

Willingness to Pay and Sensitivity to Time Framing: A Theoretical Analysis and an Application on Car Safety

Stated preference (SP) surveys attempt to obtain monetary values for non-market goods that reflect individuals’ “true” preferences. Numerous empirical studies suggest that monetary values from SP studies are sensitive to survey design and so may not reflect respondents’ true preferences. This study examines the effect of time framing on respondents’ willingness to pay (WTP) for car safety. We explore how WTP per unit risk reduction depends on the time period over which respondents pay and face reduced risk in a theoretical model and by using data from a Swedish contingent valuation survey. Our theoretical model predicts the effect to be nontrivial in many scenarios used in empirical applications. In our empirical analysis we examine the sensitivity of WTP to an annual and a monthly scenario. Our theoretical model predicts the effect from the time framing to be negligible, but the empirical estimates from the annual scenario are about 70 % higher than estimates from the monthly scenario.     

Which Central and Eastern European country has the greatest potential for housing market recovery？

This paper is concentrated on analyzing the CEE （Central and Eastern European） countries housing and lending market development in 2002-2009. These countries experienced real estate boom and bust phases during that time and the aim of this paper is to understand which of these countries have the greatest potential for housing market recovery. The study has conducted comparable analysis of these countries and their real estate and lending market. The data was collected from central banks, national statistic offices and real estate companies. The results suggest that countries with higher housing debt had stronger real estate booms and the current bust-cycle has caused much steeper decline in prices. This paper attempts to look at the CEE housing markets from the developer＇s or investor＇s point of view and may be useful for banks and other financial institutions which are related to housing market and lending.     

Models of Quality‐Adjusted Life Years when Health Varies Over Time: Survey and Analysis

Abstract.  Quality‐adjusted life year (QALY) models are widely used for economic evaluation in the health care sector. In the first part of the paper, we establish an overview of QALY models where health varies over time and provide a theoretical analysis of model identification and parameter estimation from time trade‐off (TTO) and standard gamble (SG) scores. We investigate deterministic and probabilistic models and consider five different families of discounting functions in all. The second part of the paper discusses four issues recurrently debated in the literature. This discussion includes questioning the SG method as the gold standard for estimation of the health state index, re‐examining the role of the constant‐proportional trade‐off condition, revisiting the problem of double discounting of QALYs, and suggesting that it is not a matter of choosing between TTO and SG procedures as the combination of these two can be used to disentangle risk aversion from discounting. We find that caution must be taken when drawing conclusions from models with chronic health states to situations where health varies over time. One notable difference is that in the former case, risk aversion may be indistinguishable from discounting.     

Extent of managerial IT use,learning routines,and firm performance: A structural equation modeling of their relationship

Organizations increasingly rely on information technology (IT) to improve performance. Yet, there is debate about the pay-off of the IT revolution, and empirical evidence suggests that investments in IT do not guarantee enhanced performance. Drawing from accounting, marketing, management and information technology literature, this study uses structural equation modeling to assess the extent to which managerial use of IT is intertwined with control issues including learning routines (internal and external), product quality, cost improvement, customer satisfaction and firm profitability. The conceptual framework builds on knowledge- and resource-based views and return on quality perspectives. The results indicate support for the theoretical framework. Extent of managerial IT use influences internal and external learning routines that influence quality and cost improvement. Quality improvement significantly impacts customer satisfaction and cost improvement that significantly impact firm profitability. The non-hypothesized paths are not significant, indicating that learning routines, quality improvement, cost improvement and customer satisfaction are intervening variables between extent of managerial IT use and firm profitability. Further, the sample is split into two industry subgroups, durable and nondurable goods subgroups, and the two-group analysis reveals that industry moderates the relationship among the variables under study. The effects are in general more pronounced for durable goods firms.     

R&D Investments with Competitive Interactions

In this article we develop a model to analyze patent-protected R&D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the decision maker has to take into account not only the factors that affect her/his own decisions, but also the factors that affect the decisions of the other investors. The real options framework utilized to deal with investments under uncertainty is extended to incorporate the game theoretic concepts required to deal with these interactions. Implementation of the model shows that competition in R&D, in general, not only increases production and reduces prices, but also shortens the time of developing the product and increases the probability of a successful development. These benefits to society are countered by increased total investment costs in R&D and lower aggregate value of the R&D investment projects.     

Are the Mediterranean countries competitive in fresh fruit and vegetable exports?

For many of the countries surrounding the Mediterranean Sea, fruit and vegetables are very important products. In light of the increasing trade liberalization and thus increasing competition between countries, this paper aims to investigate the competitiveness of ten Mediterranean countries with respect to fresh fruit and vegetables. The analysis rests on two foundations. First, a set of indicators are calculated to give a general impression of trends and potentials. Second, a constant market share analysis is performed where the countries' competitiveness in world trade is investigated. The results show that the competitiveness of the investigated countries has deteriorated over the period.     

Dynamic Portfolio Selection: the Relevance of Switching Regimes and Investment Horizon

This paper investigates the questions of dynamic portfolio selection and intertemporal hedging within a Markovian regime‐switching framework. The investment opportunity set is spanned by a well‐diversified home‐market portfolio and the risk‐free asset. Our results highlight the economic importance of regimes, as optimal portfolio weights are clearly dependent on the prevailing regime. We present evidence that the question of intertemporal hedging is a more complex issue than is hinted in the previous literature, since demand for intertemporal hedging is present in some regimes, but not in others. Finally, our main findings are qualitatively unchanged across the four largest stock markets in the world.     

中国和国际林产品贸易对森林保护和人民生计的影响

分析了中国林产品进出口的总量、结构、变化、增长趋势及对相关国家和地区人民生计的影响,提出了作为进口国消费国、生产国和加工国应采取的措施。1997年到2005年间,中国林产品进口总量折合原木材积增长了两倍多,从0.40亿m3增长到1.34亿m3,进口额也翻了一番。2005年,俄罗斯、马来西亚、印尼、泰国、巴布新几内亚列中国总木质林产品进口前5名,进口额占71.6%;加拿大、印尼、俄罗斯、智利、美国列纸浆进口前5位,进口额占77.6%;美国、日本、香港、欧盟是中国林产品出口的主要目的地。中国迅速增长的林产品贸易对国际社会也有消极影响,导致不可持续采伐、非法采伐等问题,但中国只是全球产业链上的一环,来自美国、欧盟和日本的购买者和零售商也负有不可推卸的责任。中国应认清其在国际林产品贸易中的关键地位,加快其林业部门的改革步伐,推动本国的林产品生产和供给,实现可持续的林业发展。