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.     

The Impact of Direct Income Transfers of CAP on Greek Olive Farms’ Performance: Using a Non‐Monotonic Inefficiency Effects Model

We analyse the impacts of direct income transfers on the technical efficiency of Greek olive farms. We use a production frontier function and a non‐monotonic inefficiency effects model, which incorporates the influences of exogenous variables (subsidies, farm characteristics, etc.) on technical efficiency. The model is applied to 1995–2004 FADN data. The results show that direct transfers of the CAP had a negative and monotonic effect on technical efficiency, whereas the degree of specialisation had a non‐monotonic effect on technical efficiency.     

Structural Change and Long‐run Relationships between US and EU Wheat Export Prices

This paper analyses the nature of the long‐run relationship between US and EU wheat export prices over the period 1981–2000. We employ a novel approach of testing for cointegration with structural change developed by Barassi and Taylor (A Test for Change in the Cointegrating Rank, University of Birmingham, Birmingham, 2004). The method enables us to determine the breakpoint, which is found to occur after the 1992 CAP reforms were implemented. On analysing the two separate subperiods, we find no evidence of a long‐run relationship prior to the 1992 CAP reform. However, clear evidence of a long‐run relationship is found after the CAP reforms were implemented. Further analysis reveals that, in the post‐CAP reform period, the EU wheat prices follow then US soft wheat prices, consistent with the EU export subsidy regime over this period, albeit that export subsidies by the EU have been relatively small.     

Potential Conflict and Inefficiencies Arising in Agri‐environmental Management

We characterise the welfare implications of uncoordinated policy decisions in the presence of multiple externalities, illustrated with an aquifer. We concentrate on the problem of coordination that can occur when distinct agricultural and water authorities implement their respective policies (to optimise food production and groundwater use) with environmental concerns in mind. We represent this problem as an open‐loop Nash game, which compares the game‐theoretical solution to a centrally planned solution. We show that the inefficiencies arise from differences in the account taken of relevant costs by different authorities. We demonstrate that the magnitude of the inefficiency generated by the absence of coordination of our authorities varies depending on the weights put on environmental benefits by each authority, and discuss the implications of analysis for future research and policy.     

Sustainable agricultural intensification in forest frontier areas

The Lore Lindu region in Indonesia—as in many forest frontier areas in Southeast Asia—has experienced rapid deforestation due to agricultural expansion in the uplands, at the forest margins. This has resulted in aggravated problems of erosion and water availability, threatening agricultural productivity growth. At the same time, technical progress is promoting agricultural intensification in the lowlands. In this article, we examine how improved technologies for paddy rice cultivation in the lowlands have affected agricultural expansion and deforestation in the uplands. The question of a “forest‐saving” or “forest‐clearing” effect related to technical innovation is important from a sustainable development perspective and remains a controversial issue in the literature. We address this question for the Lore Lindu region with an empirical model in which expansion in the lowlands and the uplands is estimated simultaneously. We use data from an extensive village survey conducted in the region, combined with GIS data. To guide the empirical analysis, we develop a theoretical framework based on a Chayanov‐type agricultural household model. The model analyzes farmers' land allocation decisions, taking into account the lowland–upland dichotomy in the agricultural sector. The empirical findings, corroborated by the analytically derived results, show how technical progress for lowland production affects land use at the forest margins and how these effects depend on the factor‐intensity of the technology. The findings imply specific rural development policies for sustainable agricultural intensification in forest frontier areas.     

Adoption of farm‐based irrigation water‐saving techniques in the Guanzhong Plain,China

This article analyses adoption of farm‐based irrigation water saving techniques, based on a cross‐sectional data set of 357 farmers in the Guanzhong Plain, China. Approximately 83% of the farmers use at least one farm‐based water‐saving technique. However, the traditional, inefficient techniques border and furrow irrigation are still prevalent whereas the use of advanced, more efficient techniques is still rather rare. We develop and estimate an adoption model consisting of two stages: awareness of water scarcity and intensity of adoption. We find that awareness of water scarcity and financial status enhance adoption of more advanced techniques whereas access to better community‐based irrigation infrastructure discourages it. We furthermore find both community‐based irrigation infrastructure and farm‐based irrigation water‐saving techniques have mitigating effects on production risk. From the results it follows that adoption can be stimulated via financial support and via extension aimed at enhancing awareness of water scarcity.     

Agricultural Policy Reform and Off‐farm Labour Decisions

Off‐farm labour decisions of a sample of Kansas farmers are evaluated. The central question of our analysis pertains to whether 1996 US farm policy reforms may have altered the decisions to work off the farm. The effects of policy decoupling on off‐farm labour are complex: different aspects of policy changes can have opposing effects on off‐farm work decisions. Essentially, this makes this issue an empirical question. Results show that the introduction of fixed, decoupled payments in 1996 might have reduced the likelihood of off‐farm labour participation. However, the new policy environment may have increased farm households’ revealed aversion to risk, motivating a higher participation in non‐farm labour markets. The effects of 1996 policy reforms on farm income variability could have been attenuated by changes in US crop insurance programmes and by an increase in emergency assistance payments towards the end of the 1990s. The reduction in price supports may have increased the motivation for working off the farm. The net effect of the overall reforms on off‐farm work participation is not likely to have been large.     

Using proportional modeling to evaluate irrigator preferences for market‐based water reallocation

Irrigators’ policy preferences for water reallocation programs usually take the form of proportional data, where one option will be relatively more or less favored than another in the composition of a government's total budget apportionment to address water reform. This study applies a zero‐one inflated beta regression to model Murray–Darling Basin irrigators’ preferences for market‐based water policy programs. Market‐based arrangements are more likely to provide efficient solutions to water reallocation problems, particularly where future uncertainty and appropriate pricing induce irrigator preferences for such programs. Our modeling of drivers of irrigator preferences for government expenditure on market‐based programs identified different determinants of zero (a corner solution) and proportional outcomes for the reallocation of Murray–Darling Basin water. In addition, the proportional modeling identifies some variables (namely, state regional influences, the type of farm production and recent debt, low income, or water allocation stressors) that increase engagement with market‐based programs. Interestingly, while price variables are important and statistically significant, they appear to be less relevant to program engagement than other influences.     

Optimal generic advertising in an imperfectly competitive food industry with variable proportions⋆

This paper determines the impact of food industry market power on farmers' incentives to promote in a situation where funds for promotion are raised through a per‐unit assessment on farm output and food industry technology is characterized by variable proportions. Specifically, building on earlier studies by Azzam [Am. J. Agric. Econ. 80 (1998) 76] and Holloway [Am. J. Agric. Econ. 73 (1991) 979], Muth's [Oxford Econ. Papers 16 (1965) 221] model is extended to consider the farm‐level impacts of generic advertising when downstream firms possess oligopoly and/or oligopsony power and advertising expenditure is endogenous at the market level. Applying the model to the US beef industry, we find that for plausible parameter values market power reduces farmers' incentives to promote. However, the disincentive is moderated by factor substitution, and effectively vanishes as the factor substitution elasticity approaches the retail demand elasticity. This suggests that the Dorfman–Steiner theorem, suitably modified to account for factor substitution, suffices to indicate optimal advertising intensity in the US beef sector.     

The role of common pool problems in irrigation inefficiency: a case study in groundwater pumping in Mexico

Groundwater depletion is a serious problem in Mexico. Several policy alternatives are currently being considered in order to improve the efficiency of irrigation water use so that extraction of groundwater is diminished. An understanding and quantification of different sources of inefficiency in groundwater extraction is critical for policy design. Survey data from a geographically extensive sample of irrigators is used to gauge the importance of common pool problems on input‐specific irrigation inefficiency. Results show that mechanisms of electricity cost sharing implemented in many wells have a sizable impact on inefficiency of irrigation application. Moreover, irrigation is very inelastic to its own unitary cost. Therefore, results suggest that policies aimed at eliminating electricity cost‐sharing mechanisms would be significantly more effective than electricity price‐based policies in reducing irrigation application. Results also show that well sharing does not affect groundwater pumping significantly, suggesting either a limited effect of individual pumping on water level or absence of strategic pumping by farmers sharing the wells.     

Six Decades of Total Factor Productivity Change and Sources of Growth in Bangladesh Agriculture (1948–2008)

This study applies the Färe–Primont index to calculate total factor productivity (TFP) indices for agriculture in 17 regions of Bangladesh covering a 61‐year period (1948–2008). It decomposes the TFP index into six finer components (technical change, technical‐, scale‐ and mix‐efficiency changes, residual scale‐ and residual mix‐efficiency changes). Results reveal that TFP grew at an average rate of 0.57% p.a. led by the Chittagong, Rajshahi, Rangpur, Dinajpur and Noakhali regions. TFP growth is largely powered by technological progress estimated at 0.74% p.a. Technical efficiency improvement is negligible (0.01% p.a.) due to stagnant efficiency in most of the regions. Decline in scale efficiency is also negligible (0.01% p.a.), but the decline in mix efficiency is high at 0.19% p.a. Decomposition of the components of TFP changes into finer measures of efficiency corrects the existing literature’s blame of a decline in technical efficiency as the main cause of poor TFP growth in Bangladesh. Among the sources, farm size, R&D investment, extension expenditure and crop specialisation positively influenced TFP growth, whereas the literacy rate had a negative influence on growth. Policy implications include encouraging investment in R&D and extension, land reform measures to increase average farm size, promotion of Green Revolution technology and crop diversification.     

Enhancing productivity on suburban dairy farms in China

Dairy farms in China's suburban areas have been playing an important role in providing urban markets with fresh milk. With the rising demand for fluid milk and dairy products in the cities, there is a perception that small and scattered dairy farms in China's provinces are gradually disappearing and more concentrated dairy cattle farming is being formed near suburban areas. This article uses farm‐level survey data and stochastic input distance functions to make estimates of total factor productivity (TFP) on suburban dairy farms, as well as for the entire dairy sector. The results show that over the past decade TFP growth has been positive on suburban dairy farms, and this rise in productivity has been driven mostly by technological change. However, at the same time we find that, on average, the same farms have been falling behind the advancing technical frontier. We also find one of the drivers of the suburban dairy sector is the relatively robust rate of technological change of these farms, which has been more rapid than on farms in the dairy sector as a whole. The results suggest that efforts to achieve greater adoption of new technologies and better advice on how to use the technologies and manage production and marketing within the suburban dairy sector will further advance productivity growth in the sector.     

Farmers’ Willingness to Participate in Payment‐for‐Environmental‐Services Programmes

Understanding farmers’ willingness to participate in agricultural payment‐for‐environmental‐services (PES) programmes is an essential precondition for designing effective and efficient programmes. Willingness to participate is typically examined via stated preference surveys using the standard hurdle model for whether and how much to participate. Among respondents who decline to participate, such analyses cannot distinguish between respondents who declined due to the payment level and those who were not interested at all. This paper applies a double hurdle model to incorporate a prior condition for whether a respondent is even willing to consider participating in the PES market. The model uses a unique stated preference survey permitting separation of the consideration and enrolment decisions of 1,700 farmers in Michigan, USA. The first hurdle probit model suggests that farmers’ willingness to consider PES chiefly depends on farm and farmer characteristics, while the second hurdle tobit model shows that decisions on whether and how much to enrol depend more on the payment offer and marginal benefit–cost criteria. This study provides fresh insights on facilitating farmer participation in PES programmes using tiered strategies that differ in costs of programme payment and administration.     

Road connectivity,population, and crop production in Sub‐Saharan Africa

This study adopts a cross‐sectional spatial approach to examine the relationship between transport infrastructure, population location, and agricultural production in Sub‐Saharan Africa using new data obtained from geographic information systems (GIS). We find that both population and agricultural production are spatially concentrated near large cities, with 41.4% of population and 23.6% of agricultural production (in value terms) within 2.5 hours travel time to large cities. Taking into account agroecological and other factors, we find a statistically significant association between travel time and agricultural production. Using coefficients estimated for Mozambique, we simulate the effects of hypothetical increases in road investments on travel times and agricultural production, suggesting that improvements in road infrastructure could facilitate a substantial increase in agricultural production.     

Deprived land-use intensification in shifting cultivation: the population pressure hypothesis revisited

This article provides a theoretical framework, based on optimal control theory, to analyze farm households' land‐use intensification decisions in forest‐based shifting cultivation (slash‐and‐burn) agroecosystems. The main results from the analysis generally coincide with the “Population Pressure Hypothesis” (PPH) as an important driver of soil degradation due to the so‐called “fallow crisis” or “deprived land‐use intensification” in shifting cultivation. However, the model also shows, from a supply perspective, that such a vicious circle of lower yields and greater forest land clearing may be avoided when the production elasticity of on‐farm labor outweighs the elasticity of substitution between farm labor and soil fertility. Furthermore, using data from shifting cultivating households from Yucatán, Mexico, we calibrate the effect of changes in population density. The numerical analysis suggests that by contrast to better‐off households, when population density increases, poorer shifting cultivating households' optimal labor allocation strategy is to further extensify land use by clearing more forest in the village common property land, or ejido land.     

Technical efficiency and impact of environmental regulations in farrow-to-finish swine production in Taiwan

This article demonstrates how technical efficiency and the impact of environmental regulations of Taiwanese farrow‐to‐finish swine production can be estimated in the presence of undesirable outputs. The issue of measuring technical efficiencies while considering undesirable outputs has been addressed by past studies. But the proper method of including undesirable outputs has always been a subject of debate. This article develops a data envelopment analysis (DEA)‐based model that includes undesirable outputs. The technologies of desirable output production and undesirable output control are considered simultaneously. This allows one to transform undesirable output into desirable output, whereby a traditional Shephard distance function can be used to measure technical efficiencies. An approach to measuring the impacts due to environmental regulations is then derived. Empirical results show that larger farms are more technically efficient than small‐sized farms, but no clear conclusions can be reached for the measures of regulatory impact among farms with different sizes. On average, the sample farms incurred an opportunity cost due to environmental regulations equivalent to 9.8% of market value. Opportunity costs rise with efficiency.     

The Effect of Cooperatives on Quality‐Enhancing Innovation

This paper develops game‐theoretic models of heterogeneous consumers to analyse the effect of cooperatives on quality‐enhancing product innovation activity, the pricing of food products and the welfare of the groups involved, in the context of a mixed duopoly where an open‐membership consumer co‐op competes with an investor‐owned firm in markets for horizontally differentiated products. Analytical results show that the involvement of the member welfare‐maximising co‐op in innovation activity can change the nature of product differentiation and the structure of the market, and be quality and welfare enhancing by increasing innovation activity and reducing the prices of food products. The effects of co‐operative involvement are shown to depend on the degree of consumer heterogeneity and the size of innovation costs.     

Applying cointegration and error correction to measure trade linkages: maize prices in the United States and Mexico

The impact of U.S.‐grown maize on Mexican markets is a subject of heated debate, and is complicated by limited substitution between white and yellow maize as well as regional price differences within Mexico. This article improves on previous analyses using a detailed data set of white maize prices reported weekly in 11 states across Mexico from 1998 through 2005. Using cointegration analysis and the error‐correction model, we find that prices between the United States and Mexico do not share a common long‐run relationship. Within Mexico, prices in Michoacán and Oaxaca are only weakly related with prices in neighboring states, whereas prices in Sinaloa and Jalisco exert considerable influence on prices elsewhere in Mexico. We conclude that, despite North American Free Trade Agreement (NAFTA), white maize prices in Mexico are determined by local conditions including particularly the degree of integration to other regions within Mexico.     

How sustainable is participatory watershed development in India?

Watershed conservation is widely recognized as a major strategy for rural development throughout the developing world. In India, the apparent success of participatory approaches to watershed development resulted in a decentralization of project planning, implementation, and management to local communities at the village scale. We explore the effectiveness of this so‐called community‐based approach in achieving sustainable soil and water conservation in four semi‐arid regions in India, and analyze what factors explain project success. We confirm the result of earlier studies that participatory approaches are more effective in establishing soil and water conservation in the short run. However, our main result is that investments in community organization fail to ensure household commitment to maintenance in the longer term. Without better returns to investment in soil and water conservation and without local institutions to coordinate investment in the long run, the sustainability of participatory watershed management is seriously threatened.