US—Mexico fresh vegetable trade: the effects of trade liberalization and economic growth

Studies of US‐Mexico vegetable trade have generally emphasized the importance of US tariffs in determining the competitive advantage of US producers. Even so, research has identified at least four factors related primarily to the different levels of economic development in the US and Mexico that also have important effects on US‐Mexico agricultural trade in general and fresh vegetable trade in particular. These include the differential growth rates of US and Mexican real wages, production technology (yields), and per capita income as well as cyclical movements in the real Mexican Peso/US Dollar exchange rate. This study examines the relative contribution of NAFTA and the development‐related factors to likely future changes in US fresh vegetable imports from Mexico. The analysis employs an econometric simulation model of US and Mexican markets for five fresh vegetables (tomatoes, cucumbers, squash, bell peppers, and onions) accounting for 80% of US fresh vegetable imports. The results suggest that the 1994–1995 Peso devaluation rather than NAFTA was primarily responsible for the sharp increase in US imports of Mexican vegetables observed in the first years following the implementation of NAFTA. Over time, however, the results suggest that differences in the growth rates of US and Mexican production yields and, to a lesser extent, of US and Mexican real incomes and/or real wage rates could plausibly contribute more to the future growth of US tomato, squash, and onion imports from Mexico than the trade liberalizing effects of NAFTA.     

Economies of scale and market structure in international grain trade

A large body of literature has examined international grain trade in imperfectly competitive models. The article develops a two-stage duopoly model that considers a private trader and a State Trading Enterprise (STE) competing on a foreign market. The key difference between the private trader and the STE is their international organization; while the STE makes use of external agents to export, the private firm may choose to internalize international transactions. The game is solved for different modes of competition and under both assumptions of homogeneous and differentiated products, in order to assess how these assumptions affect the outcome of the game. The results of the game are examined by using numerical examples. The analysis shows that external shocks on export markets may result in a change of market structure and, consequently, of market shares. These effects depend on the initial market structure. Furthermore, the degree of product differentiation and the assumed mode of competition significantly affect the relative values of transaction and fixed costs at which the market structure changes.     

Do stronger intellectual property rights induce more agricultural trade?: a dynamic panel data model applied to seed trade

Do stronger intellectual property rights (IPRs) induce more agricultural trade? Based on panel data for 60 countries during 1990–2000 and using a dynamic panel data model, this article assesses whether and how national differences in IPRs affect the trade flow of planting seeds imports from the United States. The empirical results show that whether or not a country adheres to IPRs agreements has no discernible impact on planting seeds that are imported from the United States, implying that the strengthening of IPRs seems not to induce more agricultural trade. This result sheds some light on the debate in the theoretical literature on the importance of IPRs and trade.     

An equilibrium displacement approach to oligopoly market analysis: an application to trade in the Korean infant formula market

This article uses an equilibrium displacement model (EDM) to assess the impact of a change in trade policy in the Korean infant formula market that is assumed to be oligopolistic. Domestic oligopolists compete in a market for a homogenous good with importing firms who enjoy the same level of market power as the domestic producers. Within an EDM framework, we investigate how the market adjusts to a new equilibrium in response to an external policy shock that improves access to foreign goods. Our empirical work consists of two steps. We first econometrically estimate the market demand elasticity and market power parameter. Then, using these estimates, we simulate our EDM model to assess the distributional effects of tariff cuts and other changes in marginal cost. Simulation results show that, with a lower market price and increased consumption, the change in consumer surplus resulting from tariff reduction is unambiguously positive, but that the change in social welfare can be in either direction, depending on who receives market rents associated with imports. When importing firms are domestic, the domestic welfare change is definitely positive. However, in the case of foreign importing firms, the direction of the welfare change crucially depends on the demand elasticity.     

Costs and benefits of livestock systems and the role of market and nonmarket relationships

In developing countries livestock are kept not only for their physical products, but also for insurance, financing, and to display status. Though this range of purposes is acknowledged, livestock policies nevertheless often emphasize physical production: a limited perspective that hampers the formulation and implementation of effective livestock policies. This article presents a comprehensive appraisal of costs and benefits of livestock systems that takes into account the institutional environment of livestock keepers. Indicators are developed that capture, quantify, and organize not only the benefits resulting from the physical production, but also those from the intangible functions. The method is illustrated by an analysis of cattle in the Western Province of Zambia. The results indicate that the perspective on livestock systems developed more closely reflects the observed decisions of the livestock keepers.     

A joint test of market power, menu costs, and currency invoicing

This article investigates exchange rate pass-through (ERPT) and currency invoicing decisions of Canadian pork exporters in the presence of menu costs. It is shown that when export prices are negotiated in the exporter's currency, menu costs cause threshold effects in the sense that there are bounds within (outside of) which price adjustments are not (are) observed. Conversely, the pass-through is not interrupted by menu costs when export prices are denominated in the importer's currency. The empirical model focuses on pork meat exports from two Canadian provinces to the U.S. and Japan. Hansen's (2000) threshold estimation procedure is used to jointly test for currency invoicing and incomplete pass-through in the presence of menu costs. Inference is conducted using the bootstrap with pre-pivoting methods to deal with nuisance parameters. The existence of menu cost is supported by the data in three of the four cases. It also appears that Quebec pork exporters have some market power and invoice in Japanese yen their exports to Japan. Manitoba exporters also seem to follow the same invoicing strategy, but their ability to increase their profit margin in response to large enough own-currency devaluations is questionable. Our currency invoicing results for sales to the U.S. are consistent with subsets of Canadian firms using either the Canadian or U.S. currency.     

Introduction to the Special Feature: Evaluating the Impact of Agricultural Projects in Developing Countries

This article provides an introduction to the special feature on impact evaluation of agricultural projects in developing countries. The special feature is motivated by an increased interest in impact evaluation both within the economics profession and the development community. The article highlights methodological issues in conducting such evaluations and discusses the current literature that empirically assesses the effectiveness of agricultural projects. A synthesis of the articles presented in the special feature and their contribution to the literature are noted as well as conclusions on the next steps in evaluating agricultural projects in developing countries.     

Economic development and the role of agricultural technology

In earlier debates on economic development, the agricultural sector's role was somewhat controversial. While dualistic models highlighted the importance of agriculture, the mainstream literature placed a greater emphasis on the creation of a modern industrial sector. Soon agriculture disappeared from the mainstream development literature to re‐emerge recently with a variety of multiple‐sector growth models emphasizing the key role of agriculture and specifically technology in agriculture. This article is an empirical cross‐country analysis of agricultural technology's role in economic development. Specifically, the hypothesis being tested is whether improvements in agricultural technology have a significant impact on long‐run economic growth. The results indicate that agricultural modernization has a positive effect on both measures of economic growth and human development.     

National policies and the sectoral pattern of economic growth

This article presents tests of whether the kinds of "national" policy variables used to explain cross-country variation in the growth of aggregate GDP per capita can also successfully explain per capita growth in the agricultural and nonagricultural sectors of developing countries. There are four main results of interest. First, relative to nonagriculture, convergence is much slower in agriculture and the burden of population growth is generally much higher. Second, while orthodox economic policies share positive associations with economic growth in the nonagricultural sectors of developing countries, such policies fail to robustly predict variation in agricultural growth. Third, size of government indicators often yield an "unexpected" positive association with agricultural growth. And finally, although there is some evidence that fewer price controls are associated with faster agricultural growth, these associations are statistically quite weak and quantitatively quite small.     

Land use and income diversification: comparing traditional and colonist populations in the Brazilian Amazon

This article compares and analyzes land use and income diversification among two distinct groups of farmers in the Brazilian Amazon: recent colonists in Ouro Preto do Oeste, Rondônia, and traditional long‐term residents along the Tapajós River, Pará. We investigate the hypothesis that farmers who diversify their cash income sources clear less forest on an annual basis, and we compare these livelihood choices across colonist and traditional populations. In particular, we develop a conceptual model based on the household production framework and use econometric models to identify determinants of diversification and forest clearing. We find that diversification of agricultural cash crops is negatively correlated with forest clearing by colonists, providing limited evidence for the hypothesis. Other significant covariates of diversification and forest clearing include cash income levels, stage in family life cycle, cattle ownership, and chemical inputs. Differences in these variables, and differences in household response to these variables, explain variation in diversification and forest clearing across the two populations.     

Agricultural trade and poverty in Chile: a spatial analysis of product tradability

Many questions have arisen about the relationship between international agricultural trade and poverty in developing countries. This article explores these questions by analyzing local agricultural tradability indices, which measure the degree to which commodities produced in a particular region are traded internationally. Data are examined for Chile, a middle‐income country with a history of international agricultural trade over the last decades. Empirical results indicate that a higher agricultural tradability index is associated with lower poverty rates across Chilean comunas.     

Regional trade agreements and trade in agri-food products: evidence for the European Union from gravity modeling using disaggregated data

The proliferation of regional trade agreements in recent years has intensified the debate on the desirability of these agreements in themselves and their coexistence with multilateral free trade under the WTO. This study contributes to this debate by analyzing trade creation and trade diversion effects of the European Union on trade flows of six major agri‐food products from 1985 to 2000. An extended gravity model is estimated employing pooled data and generalized least squares methods. The results show that the developments in the EU since the mid‐1980s have served to boost agri‐food trade significantly among the members. Some of the growth in intra‐EU trade in agri‐food products came at the expense of nonmembers as the EU reduced the degree of relative openness to trade with nonmembers during this period and diverted trade from the rest of the world into the intra‐EU channels.     

China's booming livestock industry: household income, specialization, and exit

China's production of livestock products has generally kept pace with her rapidly increasing demand. Over-supply and market corrections for various livestock products took place over the latter part of the 1990s and large numbers of householders exited this type of production. Using household survey data, we estimate the relationship between a household's specialization in livestock production and household net income in 1995, and use a logit model to explore some predictors of household exit from livestock production over the following decade of market instability. We conclude that specialist livestock households with access to necessary skills, technologies, and markets increase their incomes from further livestock specialization in the base year, whereas those to whom livestock production is relatively unimportant can increase household incomes by diverting their resources away from animal husbandry. It was specialist rather than diversified livestock households that tended to bear the brunt of the adjustment to unfavorable price movements over the decade post-1995. Policy concerns include the exit of larger-scale specialized producers who tended to earn relatively high household incomes in 1995, barriers to the effective formation and operation of horizontal and vertical integration options to help mitigate market instability, the further development of insurance programs and markets for livestock producers, and development assistance to livestock households that for various reasons cannot increase scale and specialization.     

The role of input vouchers in modernizing the fresh fruit and vegetable market in Turkey

Contractual arrangements between farmers and traders aiming at providing input/credit in return for output selling have been widely studied in the literature on agricultural economics. Nonetheless, there is one issue, which is barely mentioned in the literature: how to enforce the contract terms when traders offer credit in cash rather than input advances? This article aims to describe an innovation in farming contracts, used by fresh fruit and vegetable wholesalers in Turkey, which involves a kind of private voucher system. Drawing on original data collected from wholesalers—a segment in the supply chain hardly covered in the literature—we investigate the factors determining contract adoption using a two‐limit Tobit model. Our results suggest that this private voucher system contributes to supply chain coordination and facilitates smallholder farmer participation in export and supermarket channels, which are growing rapidly in this developing country.     

Land degradation, drought and food security in a less-favoured area in the Ethiopian highlands: a bio-economic model with market imperfections

This paper presents a bio‐economic model of Andit Tid, a severely degraded crop‐livestock farming system with high population density and good market access in the highlands of Ethiopia. Land degradation, population growth, stagnant technology, and drought threaten food security in the area. Drought or weather risk appears to have increased in recent years. The bio‐economic model is used to analyse the combined effects of land degradation, population growth, market imperfections and increased risk of drought on household production, welfare and food security. We find that the indirect effects of drought on household welfare through the impact on crop and livestock prices are larger than the direct production effects of drought. Provision and adoption of credit for fertiliser, although risky in itself, may lead to increased grain production and improved household welfare and food security. Provision of credit may have a negative effect on conservation incentives but this effect may be mitigated by linking a conservation requirement to the provision of credit for fertiliser.