The productivity of agricultural credit in India

This study examines the nature of the relationship between formal agricultural credit and agricultural Gross Domestic Product (GDP) in India, specifically the role of the former in supporting agricultural growth, using state level panel data covering the period 1995–1996 to 2011–2012. The study uses a mediation analysis framework to map the pathways through which institutional credit relates to agricultural GDP relying on a control function approach to tackle the problem of endogeneity. The findings from the analysis suggest that over this period, all the inputs are highly responsive to an increase in institutional credit to agriculture. A 10% increase in credit flow in nominal terms leads to an increase by 1.7% in fertilizers (N, P, K) consumption in physical quantities, 5.1% increase in the tonnes of pesticides, 10.8% increase in tractor purchases. Overall, it seems quite clear that input use is sensitive to credit flow, whereas GDP of agriculture is not. Credit seems therefore to be an enabling input, but one whose effectiveness is undermined by low technical efficiency and productivity.     

Convergence and divergence in regional agricultural productivity growth: evidence from Italian regions, 1951–2002

This article analyzes long‐term agricultural Total Factor Productivity (TFP) growth at regional level by testing its time‐series properties and identifying factors associated with divergence as opposed to convergence. The empirical application concerns Italian regions over the 1951–2002 time period. TFP growth decomposition ultimately attributes the observed productivity growth performance to these contrasting (convergence vs. divergence) forces. We find that technological spillovers are the key convergence force regardless of how the spillover effects are computed. At the same time, forces favoring convergence are almost offset by divergence forces (mainly scale or learning effects). This decomposition may explain the persistence of TFP growth rate differences in Italian agriculture, and could be applicable elsewhere.     

Economic and environmental effects of decoupled agricultural support in the EU

This article reports findings from a simulation model representing the European farming system disaggregated at different scales. This modeling experiment explores the effects of various decoupling options associated with the 2003 European agreement on gross margins, land use, shadow cost of land, and greenhouse gas emissions. Our results show increases in the farmers’ gross margins when decoupled support is maintained equal to the amount of direct aid previously attributed to agricultural production, assuming unchanged prices. Land used for pasture increases at the expense of land used for cereals and protein crops. The extent to which these effects materialize depends on the policy options selected by Member States when implementing the Luxembourg agreement. When they opt for some recoupling of support, adverse net economic impacts occur for producers. Regional differences in impacts are more pronounced than the analysis aggregated at European and national scales suggests. This highlights the need for further work based on geostatistical downscaling.     

The Economic impact of public agricultural research and development in the United States

In this article, we examine the relationship between public investments in agricultural research and development and the productivity‐enhancing benefits they generate. Knowledge productivity functions are estimated for U.S. agriculture using data on multifactor productivity and public knowledge stocks. We examine the time‐series properties of the data and compare alternative econometric estimation procedures. The results are used to calculate economic performance measures such as internal rates of return and benefit‐cost ratios. The real rate of return to public investments in agricultural research and development in the United States is in the range of 8–10% per annum.     

Collateral‐free lending with risk‐contingent credit for agricultural development: indemnifying loans against pulse crop price risk in India

This article addresses the problem of collateral‐free lending in the context of agricultural development. We investigate a viable alternative to traditional credit products through the development of risk‐contingent credit for operating loans and farm mortgages and apply the concept to agricultural loans for pulse crops in India. Risk‐contingent credit mitigates business and financial risk by reducing debt obligations depending on the embedded commodity options whose payoffs are linked with commodity price fluctuations. We analyze daily commodity spot prices for pulse crops in India and show how risk‐contingent structured financial instruments can be priced in practice.     

Off‐farm labor market decisions and agricultural shocks among rural households in Kenya

Using household level data from rural Kenya, this article explores whether and how farm households respond to unfavorable agricultural production environments, including any ex post adjustments in off‐farm labor supply in response to unexpected weather shocks. While controlling for a wide range of educational, demographic, and other locational factors, we examine how long‐term weather conditions and specific rainfall shocks influence a household's decision to engage in, and their earnings from, the off‐farm labor market. We find that rural households engage in off‐farm work as a long‐term strategy to deal with the effects of anticipated weather conditions on their farming operations. The analysis does not reveal major short‐term adjustments in off‐farm engagement as a result of specific, unexpected rainfall shocks; these households do however rely on remittance income and petty agricultural wage labor under these circumstances. Holding other factors constant, and conditional on participation, households in areas with a more productive local agriculture tend to earn more from off‐farm work especially in the informal/business sector than their counterparts in regions with a less productive agriculture. As expected, a vibrant local economy in the form of public investment increases the probability of off‐farm participation.     

Valuing Quality Attributes and Country of Origin in the Korean Beef Market

For beef exporters, one of the important questions in the Korean beef market is why Korean consumers are willing to pay almost three times more for domestic Korean beef than they pay for imported beef. To answer this question, we surveyed 1,000 shoppers in Seoul, Korea, and conducted a conjoint analysis on consumers’ willingness to pay (WTP) for country equity of domestic vs. imported beef and quality attributes of marbling, freshness, genetically modified organism (GMO)‐free feed ingredients and antibiotic‐free production. Among all factors contributing to the price differentials, the most important factor seems to be the country of origin followed by the use of GMO feeds and antibiotics in beef production, marbling grade and freshness. This study finds that Korean consumers value origins of imported beef approximately $14/lb less than the Korean origin. Korean consumers’ valuation of beef quality and country of origin differs by some demographic groups: older vs. younger generations, homemakers vs. non‐homemakers and consumers who prefer to purchase packaged beef vs. consumers who prefer to purchase butcher shop beef. Our empirical findings suggest that the top priority for beef exporters who wish to increase sales and value of their beef in the Korean market must be to counter Korean consumers’ strong ethnocentrism by improving the value of their country of origin.     

The interaction of speculators and index investors in agricultural derivatives markets

Through the analysis of the weekly Commodity Futures Trading Commission reports on 12 US traded agricultural commodities, we revisit the heated debate on the impact of index flows on commodities prices. After introducing a novel stock‐to‐use proxy that may be used to represent inventory variations at the intra‐month level, we show that speculators, contrary to index investors, are sensitive to commodity‐specific fundamental information. Their endogeneity to commodities markets hinders the estimation of their market impact. Regarding the market impact of index flows, the endogeneity problem is alleviated in two ways: first, we restrict the scope to agricultural commodities, for which index flows are more exogenous to market prices; second, we introduce two novel instrumental variables that are computed from index flows outside the market under analysis. We find that index investment flows are offset by commercial players, not speculators. The serial correlation of index flows may explain the tendency of speculators to synchronize with index investors. There is strong evidence of an index flows' impact in those commodities markets where speculative and index positions are the most correlated. The market impact of index flows is located in periods of liquidity stress, as is the correlation between speculative and index positions. Overall, our results demonstrate an impact of index investors on some agricultural prices and suggest that the synchronicity between speculative and index positions is an important determinant of this impact.     

Evaluating spatial and temporal variation in agricultural output elasticities in Turkey

This study evaluates spatial variation in the relationship between agricultural output and input use across Turkey. The potential impact of the national agricultural policy reform introduced in 2001 on the spatial variation in agricultural output elasticities across the country was explored. By applying a spatial production function to the province‐level data in 2000 and 2007, spatial heterogeneity in the variance of provincial total factor productivity and the input factor‐output elasticities was identified across the country. Results show that the disparities in agricultural activities and geographic conditions affected return from input factors. Empirical findings from a spatial spillover model also suggest that changes in the input factor‐output elasticities varied significantly across Turkey between 2000 and 2007, after the policy reform. Results suggest that future policy reform that recognizes regional comparative advantage through understanding the geographic heterogeneity of the agricultural sector is important for enhancing Turkey's agricultural output.     

Sectoral and poverty impacts of agricultural policy adjustments in Colombia

We aim to assess the sectoral and poverty impacts of changes in agricultural policy in Colombia. For this, we use an agriculture specialized static computable general equilibrium model, together with a microsimulation model that allows employment to shift between sectors. Results indicate that the sectoral impact from policy changes tends to be small and that it considerably varies across crops. The macro model yields some gains in wages and capital rents, a relatively larger increase in land rents, and limited labor reallocation, together leading to small poverty impacts as calculated through the microsimulation model. The incidence of rural poverty decreases by less than 1% and the same happens to the poverty gap. In addition, poverty reductions are concentrated among households near the middle of the income distribution.     

Gender and agricultural productivity: implications of the Farm Input Subsidy Program in Malawi

Alleviating gender differences in agricultural productivity is vital for poverty reduction. While numerous studies suggest that gender differences in agricultural productivity are a result of female farmers having limited access to resources, few studies investigate the role of agricultural interventions in alleviating the constraints to input use and subsequently the gender gap in productivity. This study investigates whether there are gendered gains in agricultural productivity from participating in an input subsidy program and if these gains help reduce the gender gap. Using nationally representative data that is disaggregated at the plot level, this study analyzes the large‐scale voucher‐based Farm Input Subsidy Program in Malawi. Focusing on the total value of output per hectare, relationships are identified using weighted estimators, where the weights are constructed from propensity scores, and spatial fixed effects, to address the unobservable factors that may confound the relationship between program participation and productivity. The findings suggest that participation in the program improves agricultural productivity for both male and female farmers but it does not provide disproportionate help to female famers to overcome gender disparities in agricultural productivity. This suggests that female farmers face additional constraints to productivity apart from nonlabor input use.     

Access to credit and heterogeneous effects on agricultural technology adoption: Evidence from large rural surveys in Ethiopia

Modern agricultural technologies hold huge potential for increasing productivity and reducing poverty in developing countries. However, adoption levels of these technologies have remained disappointingly low in Africa. This paper analyzes the effect of access to credit on the likelihood of adoption and use intensity of chemical fertilizers using data from large rural surveys in Ethiopia. Using a heteroscedasticity-based identification strategy to address the endogenous nature of access to credit, we find that access to credit has significant positive effects on adoption and intensity of use of chemical fertilizers. However, important heterogeneities are observed. Credit obtained from formal sources is more important for the intensity of use than for the decision to adopt chemical fertilizers. Credit taken with the primary purpose of financing agricultural inputs is more likely to promote adoption of chemical fertilizers than credit taken per se. Furthermore, reported credit effects are larger when estimated against the sample of credit-constrained non-users as compared with the pool of the whole sample of credit non-users. The results remain robust to several sensitivity analyses. Our results yield useful implications for the design, promotion, and targeting of credit services to leverage their effect on adoption of agricultural technologies.     

Price relationships between qualitatively differentiated agricultural products: organic and conventional wheat in Germany

Organic agriculture, which produces commodities that can be qualitatively differentiated from conventional food products, has grown into an important market in many countries. The dynamics of commodity prices in both sectors are partly interdependent, but are also shaped by independent determinants and have rarely been studied. We analyze organic food markets and their interdependencies with conventional markets in the context of wheat markets in Germany, which have been subject to a number of fundamental changes during the last two decades. Based on institutional market characteristics, we suggest a flexible Markov‐switching asymmetric time series model. We find a pronounced temporal sequence of market phases that differ in their asymmetric dynamics and the extent to which the organic price is influenced by the conventional price. Organic wheat prices tend to be increasingly connected to prices of conventional wheat.     

Sales location among semi‐subsistence cassava farmers in Benin: a heteroskedastic double selection model

In much of rural Africa, high transaction costs limit farmers’ market participation and thus their potential for income growth. Transaction costs can affect not only whether a farmer sells product but also whether sales occur at the farm gate or at a market. If production behavior is related to a chosen sales location, then analysis of interventions can be improved by explicit consideration of the decision of where to sell. This article develops a double‐selection model that explains consumption and production decisions by semi‐subsistence farmers who first decide whether to be a seller and then whether to sell at the farm gate or at an off‐farm location before deciding on production and consumption. The study tests the validity of this dual‐criteria model against a single‐criterion model in which a grower first decides to be a seller and then decides production, consumption, and sales location simultaneously. The results suggest that the dual‐criteria model provides more information than the single‐criterion model using a sample of cassava producer in Benin.     

Measuring public agricultural research and extension and estimating their impacts on agricultural productivity: new insights from U.S. evidence

This article provides new estimates of the marginal product of public agricultural research and extension on state agricultural productivity for the U.S., using updated data and definitions, and forecasts of future agricultural productivity growth by state. The underlying rationale for a number of important decisions that underlie the data used in cost‐return estimates for public agricultural research and extension are presented. The parameters of the state productivity model are estimated from a panel of contiguous U.S. 48 states from 1970 to 2004. Public research and extension are shown to be substitutes rather than complements. The econometric model of state agricultural TFP predicts growth rates of TFP for two‐thirds of states that is less than the past trend rate. The results and data indicate a real social rate of return to public investments in agricultural research of 67% and to agricultural extension of 100+%. The article concludes with guidance for TFP analyses in other countries.     

Gender and agriculture in sub‐Saharan Africa: introduction to the special issue

This special issue contributes to the literature on gender differences in sub‐Saharan African agriculture primarily by using new and innovative micro‐data. The first six articles have a strong focus on understanding the extent and drivers of gender differences in land productivity and use data from nationally representative household surveys that are implemented under the Living Standards Measurement Study‐Integrated Surveys on Agriculture (LSMS‐ISA) initiative. The LSMS‐ISA data are multi‐topic, with geo‐referenced household and plot locations, and information on production and identity of managers and owners at the plot level. The last two articles in the volume rely on in‐depth quantitative and qualitative case study data, which, in combination with the nationally representative data, allow for greater insights into the extent and correlates of gender differences in sub‐Saharan African agriculture. While there does seem to be persistent evidence of gender gaps, the studies find the sources of these gaps to vary within and across countries. This makes designing policies to address gender gaps more challenging, yet of crucial importance. What is clear is that the failure to directly and explicitly address the underlying causes of the disparities is likely to end up exacerbating the observed gender gaps.     

Impacts of Vessel Capacity Reduction Programmes on Efficiency in Fisheries: the Case of Australia’s Multispecies Northern Prawn Fishery

Capacity reduction programmes, in the form of buybacks or decommissioning, have had relatively widespread application in fisheries in the US, Europe and Australia. A common criticism of such programmes is that they remove the least efficient vessels first, resulting in an increase in average efficiency of the remaining fleet, which tends to increase the effective fishing power of the remaining fleet. In this paper, the effects of a buyback programme on average technical efficiency in Australia’s Northern Prawn Fishery are examined using a multi‐output production function approach with an explicit inefficiency model. As expected, the results indicate that average efficiency of the remaining vessels was generally greater than that of the removed vessels. Further, there was some evidence of an increase in average scale efficiency in the fleet as the remaining vessels were closer, on average, to the optimal scale. Key factors affecting technical efficiency included company structure and the number of vessels fishing. In regard to fleet size, our model suggests positive externalities associated with more boats fishing at any point in time (due to information sharing and reduced search costs), but also negative externalities due to crowding, with the latter effect dominating the former. Hence, the buyback resulted in a net increase in the individual efficiency of the remaining vessels due to reduced crowding, as well as raising average efficiency through removal of less efficient vessels.     

Farmers’ Income and Production Responses to Rural Taxation Reform in Three Regions in China

The relationship between agricultural taxation and production efficiency has been thoroughly explored for many countries. Recently, China has taken various measures including the rural taxation reform (RTR) to promote grain production and to increase farmer incomes. In this study, we investigate whether the Chinese policy of abolishing rural taxation has improved farm households’ incomes and affected their production decisions. Using household survey data obtained from three regions in China, we estimate the effect of the RTR on farmers’ income. Results show that the RTR has significantly improved farmers’ post‐tax net income by 9.2% in Shandong, 16.9% in Shanxi and 16.8% in Zhejiang. These increments, mostly from farm income rather than from off‐farm income, are much higher than the direct income increase from the tax savings. In addition, we examine the dynamic impact of farmers’ net income, and find that the RTR has a sustained positive income effect in Shandong and Shanxi, whereas its positive effect in Zhejiang appears temporary. We also examine farmers’ production responses to the RTR. Results show that farmers in the three regions respond in different ways: farmers in Shandong significantly increase their labour input, farmers in Zhejiang increase intermediate inputs, whereas Shanxi farmers augment their intermediate inputs and enlarge their crop acreage. It appears that the farmers’ responses to the taxation reform vary due to the agronomic and economic factors in these three regions, suggesting that diverse post‐RTR supplemental policies should be implemented in different regions.     

Smallholder participation in vegetable exports and age‐disaggregated labor allocation in Northern Tanzania

Modern agricultural supply chains have been playing an increasingly important role in developing countries and have had significant effects on rural labor markets. This article analyses the effects of smallholder farmer participation in export vegetable supply chains in Northern Tanzania on both household hired labor demand and off‐farm labor supply, using an age‐disaggregated approach. In our sample, neither separability nor exogeneity of smallholder farmer participation in export supply chains can be rejected. Hence, we apply lognormal double‐hurdle models and find that participation in export supply chains positively affects households’ decision to hire labor from all age groups. We also find that it increases the unconditional overall level of hired labor demand, while the age‐disaggregated analysis shows that these effects mostly benefit rural youth. However, our sample does not allow us to establish statistically significant evidence of an effect on household off‐farm labor supply although the point estimates point to nonnegligible positive effect sizes.