The Formation of GM‐free and GM Coasean Clubs: Will They Form and If So How Much Can They Achieve?

The unintended presence of traces of genetically modified (GM) crops in the harvests of non‐GM crops plays a prominent role in the debate over the coexistence of GM and non‐GM crops. One way to address the issue is the formation of GM‐free or GM‐only clubs. We model the decisions of individual farmers to cultivate either GM or non‐GM crops and combine this with a game theoretic model of club formation to investigate the feasibility of such clubs. We consider two liability regimes: GM farmers are liable or they are not. We consider two benchmarks: Nash equilibrium without negotiations and the efficient allocation and compare those with partial co‐operation through a Coasean club. We find that in both regimes a relatively large club can form but they are not always necessary to reach the efficient allocation. In fact, if farmers can freely decide under profit maximisation what to cultivate, they reach 95% of an efficient allocation. This holds independent of the property rights system and provides strong support for coexistence policies based on ex‐post liability such as in the US and Spain.     

Bias from Farmer Self‐Selection in Genetically Modified Crop Productivity Estimates: Evidence from Indian Data

In the continuing debate over the impact of genetically modified (GM) crops on farmers of developing countries, it is important to accurately measure magnitudes such as farm‐level yield gains from GM crop adoption. Yet most farm‐level studies in the literature do not control for farmer self‐selection, a potentially important source of bias in such estimates. We use farm‐level panel data from Indian cotton farmers to investigate the yield effect of GM insect‐resistant cotton. We explicitly take into account the fact that the choice of crop variety is an endogenous variable which might lead to bias from self‐selection. A production function is estimated using a fixed‐effects model to control for selection bias. Our results show that efficient farmers adopt Bacillus thuringiensis (Bt) cotton at a higher rate than their less efficient peers. This suggests that cross‐sectional estimates of the yield effect of Bt cotton, which do not control for self‐selection effects, are likely to be biased upwards. However, after controlling for selection bias, we still find that there is a significant positive yield effect from adoption of Bt cotton that more than offsets the additional cost of Bt seed.     

Forecasting the Adoption of GM Oilseed Rape: Evidence from a Discrete Choice Experiment in Germany

This paper explores farmers’ willingness to adopt genetically modified (GM) oilseed rape prior to its commercial release and estimates the ‘demand’ for the new technology. The analysis is based upon choice experiments with 202 German arable farmers. A multinomial probit estimation reveals that GM attributes such as gross margin, expected liability from cross pollination, or flexibility in returning to conventional oilseed rape significantly affect the likelihood of adoption. Neighbouring farmers’ attitudes towards GM cropping and a number of farmer and farm characteristics were also found to be significant determinants of prospective adoption. Demand simulations suggest that adoption rates are very sensitive to the profit difference between GM and non‐GM rape varieties. A monopolistic seed price would substantially reduce demand for the new technology. A monopolistic seed supplier would reap between 45% and 80% of the GM rent, and the deadweight loss of the monopoly would range between 15% and 30% of that rent. The remaining rent for farmers may be too small to outweigh possible producer price discounts resulting from the costs of segregating GM and non‐GM oilseed rape along the supply chain.     

Ex Ante Impact Assessment under Imperfect Information: Biotechnology in New Member States of the EU

Some argue that the lack of modern agricultural development in the former socialist countries of Central and Eastern Europe has made cutting‐edge biotechnology attractive. However, enthusiasm for planting genetically modified (GM) crops varies greatly in the enlarged European Union (EU) and especially among the New Member States (NMS); the Czech GM maize area is progressively growing whereas Hungary imposed a de facto ban on GM crops. Remarkably, the Hungarian ban was not supported by any cost–benefit assessment. In the literature, ex ante impact assessments of monopolistically priced technologies are often based on cross‐sectional comparisons of average cropping budgets. Such assessments ignore heterogeneity of farmers and underestimate the true impact of these technologies because of homogeneity bias. Therefore, we propose an improved method by explicitly modelling farmer heterogeneity under imperfect information, and assess the potential value and benefit sharing of GM crops in the two NMS using a stochastic partial equilibrium model. The total potential value of GM crops is estimated at €82 million for both countries, of which €60 million (73%) accrues to farmers and €22 million (27%) to the gene developers and the seed industry. This is in line with the literature on global benefit sharing of first‐generation GM technologies.     

The estimated ex ante economic impact of Bt cowpea in Niger,Benin and Northern Nigeria

Genetically modified (GM) crops could increase economic growth and enhance living standards in Africa, but political issues have slowed the use of biotechnology. This is the first study that assesses the potential impact of GM crops in Africa while considering the preferences of producers and consumers towards GMOs as well as the income and price risks they face. The study uses a choice experiment to estimate the ex ante economic impact of a novel technology, Bacillus thuringiensis (Bt) cowpea, on producers and consumers in Benin, Niger and northern Nigeria. The experiment involves the simulation of a market transaction similar to those in open air markets in West Africa. During the market simulation, respondents are informed about the advantages and disadvantages, including health risks, of Bt cowpea. The results from the study suggest that cowpea growers and consumers in Benin and northern Nigeria prefer Bt to conventional cowpea for health safety reasons. The results estimate that social welfare in Benin, Niger and northern Nigeria would increase by at least US$11.82 per capita annually with Bt cowpea, if seed sectors are operating smoothly. With inefficiencies in seed sectors and the potential for cowpea acreage increase, the estimated social welfare increase in the region would be about US$1.26 per capita annually.     

GM crop technology and trade restraints: economic implications for Australia and New Zealand*

How much might the potential economic benefit from enhanced farm productivity associated with crop biotechnology adoption by Australia and New Zealand (ANZ) be offset by a loss of market access abroad for crops that may contain genetically modified (GM) organisms? This paper uses the Global Trade Analysis Project (GTAP) model to estimate effects of other countries' GM policies without and with ANZ farmers adopting GM varieties of various grains and oilseeds. The gross economic benefits to ANZ from adopting GM crops under a variety of scenarios could be positive even if the strict controls on imports from GM‐adopting countries by the European Union are maintained, but not if North‐East Asia also applied such trade restaints. From those gross economic effects would need to be subtracted society's evaluation of any new food safety concerns and negative environmental externalities (net of any new environmental and occupational health benefits), as well as any extra costs of segregation, identity preservation and consumer search.     

Why Do Some Bt-Cotton Farmers in China Continue to Use High Levels of Pesticides?

China was the first developing country to introduce Bt cotton on a large scale. This paper provides an indepth economic analysis of Bt cotton production by small-scale farmers in China. Data were collected in 2002 in Linqing County, in Shandong Province and comprised a season-long cotton production monitoring with 150 farmers and complementary household interviews. For quality assessment, the Bt toxin concentration of the various Bt varieties used by the farmers was determined for each plot. All farmers were growing insect resistant Bt cotton varieties. Yet, they sprayed high amounts of chemical insecticides, out of which 40% were extremely or highly hazardous. The paper reviews methodological issues inherent to impact assessment of crop biotechnology and identifies market and institutional failure as possible reasons for continued high pesticide use. Using the damage function methodology the coefficients for both damage control inputs, i.e., Bt varieties (measured as toxin concentration), and insecticide quantity were not significantly different from zero. Results show that absence of enabling institutions and lack of farmer knowledge can considerably limit the benefits of Bt cotton for small-scale farmers. The paper points out the importance to include the institutional conditions in the evaluation of agricultural biotechnology in developing countries.     

The colour of maize: Visions of green growth and farmers perceptions in northern Laos

The rapid expansion of hybrid maize in the uplands of northern Laos is viewed by the government as meeting policy aims related to green economic development. Yet, growing evidence of negative consequences of maize expansion are emerging. Based on farmers’ perceptions, we study: (1) farmers’ reasons for adopting and abandoning maize, and; (2) implications of commercial maize expansion on local livelihood security and inclusiveness (food supply, income, risk coping, and ability to join maize growing), and environmental sustainability (productivity, and soil and forest quality) over time (2013 and 2016). Results show that maize has advantages in terms of labour allocation, and it provides much-needed cash income. Yet, swidden is the main food provider and an essential safety net for unforeseen risks (including maize crop failures or price fluctuations). The way that maize was produced did not meet the criteria of green economic development due to its negative effects on the environment (soil and forest degradation) and socioeconomic sustainability (household differentiation, increased economic risks, debts, and food insecurity). By providing a local perspective, this study encourages a critical reflection of the underlying assumptions and conceptualization of the green economy approach in Laos, and argues for policies and measures that consider a more holistic perspective of human wellbeing and the environment.     

Farm-Level Economic Performance of Genetically Modified Cotton in Maharashtra, India

A study of the commercial growing of Bacillus thuringiensis (Bt) cotton in India, compares the performance of over 9,000 Bt and non-Bt cotton farm plots in Maharashtra over the 2002 and 2003 seasons. Results show that since their commercial release in 2002, Bt cotton varieties have had a significant positive impact on average yields and on the economic performance of cotton growers. Regional variation showed that, in a very few areas, not all farmers had benefited from increased performance of Bt varieties.     

The economic costs and benefits of a participatory project to conserve maize landraces on farms in Oaxaca,Mexico⋆

Conventional methods were used to assess the benefits and costs of an unconventional project whose purpose was to test whether participatory crop improvement can encourage Mexican farmers to continue growing maize landraces by enhancing their current use value. Findings suggest that farmers as a group earned a high benefit‐cost ratio from participating, though from the perspective of the private investor the returns were low. The project also generated social benefits, but these would be difficult (and costly) to measure. There was a gender bias in both participation and benefits distributions, though there is some evidence of a welfare transfer to maize deficit households. Application of other valuation approaches will be necessary in order to assess both the private and social benefits of similar projects.     

Improving recommendations resulting from on-farm research: agroforestry,risk, profitability and vulnerability in southern Malawi

Leguminous agroforestry (AF) species have been investigated and promoted in Malawi as a means to improve soil quality and maize (Zea mays) yields. Our objective was to determine whether AF systems' recommendations that solely consider impacts on average maize yields differ from those that include an analysis of production risk, profitability among different wealth groups and socioeconomic vulnerability. Employing participatory quantitative and qualitative on-farm research techniques, we investigated three AF-based maize/legume relay-cropping practices in southern Malawi. The perennial legumes included Sesbania sesban, Tephrosia vogelii and Cajanus cajan (pigeonpea). We found that AF species recommendations did diverge from those based solely on maximizing maize yields when incorporating risk, profitability and socioeconomic vulnerability as additional variables. For instance, the highest yielding system (the S. sesban/maize relay crop) was never recommended for the most vulnerable farmers based on the vulnerability analysis, and the cropping systems were often more profitable for the least vulnerable farmers than they were for the most vulnerable farmers. Cropping system recommendations based solely on obtaining the highest average maize yields would also have generally overlooked the economic and nutritional importance of pigeonpea, and the difficulty for the most vulnerable farmers to profit from fertilizers, potentially placing these farmers at greater risk.     

Economics of Soil Conservation: The Upper Mahaweli Watershed of Sir Lanka

This paper estimates the benefits and costs of soil conservation in the Upper Mahaweli Watershed of Sir Lanka. The costs of soil erosion control include the implementation costs of control measures, while the benefits are reductions in the costs of soil erosion. In contrast to many studies in developed countries, the on‐site benefit of soil erosion control in Sri Lanka is estimated to be greater than the off‐site benefit While a social benefit‐cost analysis demonstrates that it is socially desirable to implement conservation measures, the private financial analyses indicate that it is feasible for individual farmers to adopt the conservation measures. Despite private economic feasibility, programs addressing farmers' reluctance to adopt soil conservation measures may be preferable to public intervention in soil conservation activities when the on‐site benefits are greater than the off‐site benefits.     

Measuring postharvest losses at the farm level in Malawi

This article measures farm‐level postharvest losses for maize, soya and groundnuts among 1,200 households in Malawi. Farmers answered a detailed questionnaire designed to learn about losses during harvest and transport, processing and storage and which measures both complete losses and crop damage. The findings indicate that fewer than half of households report suffering losses conditional on growing each crop. Conditional on losses occurring, the loss averages between 5 and 12 per cent of the farmer's total harvest. Compared to nationally representative data that measure losses using a single survey question, this study documents a far greater percentage of farmers experiencing losses. We find that losses are concentrated in harvest and processing activities for groundnuts and maize; for soya, they are highest during processing. Existing interventions have primarily targeted storage activities; however, these results suggest that targeting other activities may be worthwhile.     

Variety characteristics and maize adoption in Honduras

This paper summarises research into factors contributing to low levels of adoption of improved maize varieties in Honduras. Empirical analysis was based on an agricultural household model which explicitly incorporates variety characteristics into the household's optimisation process. We considered a multitude of production and consumption characteristics valued by farmers, as well as an array of household socioeconomic characteristics and measures of village‐specific marketing costs. Empirical results indicated that marketing costs and production characteristics are important explanators of variety choice, whereas consumption characteristics are not, and that information deficits may be an important limiting factor to adoption of improved varieties.     

Innovation and Trade with Endogenous Market Failure: The Case of Genetically Modified Products

A partial-equilibrium, two-country model is developed to analyze implications from the introduction of genetically modified (GM) products. In the model, innovators hold proprietary rights, farmers are (competitive) adopters, some consumers deem GM food to be inferior in quality to traditional food, and the mere introduction of GM crops affects the costs of non-GM food (because of costly identity preservation). Among the results derived, it is shown that, although GM innovations have the potential to improve efficiency, some groups can be made worse off. Indeed, it is even possible that the costs induced by GM innovations outweigh the efficiency gains.     

Landscape Clubs: Co-existence of Genetically Modified and Organic Crops

The possibility of increased production of genetically modified (GM) crops in agriculture accentuates the need to examine the feasibility of GM and non‐GM technologies co‐existing on a common physical landscape. Using the theory of clubs, this paper examines the possibility of co‐existence for GM and organic wheat technologies through the formation of an organic club with an endogenously determined buffer zone. Given the available data on prices, and yields, it is shown that a club can be created in which GM and organic agricultural production technologies can economically co‐exist in the same physical landscape. Specifically, co‐existence results in an increase in economic welfare over a situation where only GM technology is used but is not Pareto superior because producers in the buffer zone will incur injury. We show that organic producers in the club can compensate producers in the buffer zone and still be better off. Hence, the compensation principle holds. La possibilité de production accrue de cultures génétiquement modifiées (GM) accentue la nécessité d'examiner la faisabilité de coexistence des technologies GM et non GM dans un même paysage agricole. À l'aide de la théorie des clubs, le présent article a examiné la possibilité de coexistence des technologies de culture de blé GM et de blé biologique en créant un club ?biologique? comprenant une zone tampon déterminée de façon endogène. Compte tenu des données disponibles concernant les prix et les rendements, il est montré qu'il est possible de créer un club au sein duquel les technologies de production de cultures biologiques et GM peuvent économiquement coexister dans un même paysage naturel. Spécifiquement, la coexistence engendre une augmentation du bien‐être économique par rapport à une situation où seule la technologie GM est utilisée, mais elle n'est pas Pareto supérieure parce que les producteurs dans la zone tampon subiront des dommages. Nous montrons que les producteurs de cultures biologiques membres du club peuvent indemniser les producteurs de la zone tampon tout en demeurant en bonne position. Le principe de compensation tient donc.     

Productivity impact of drought tolerant maize varieties under rainfall stress in Malawi: A continuous treatment approach

Drought tolerant (DT) maize varieties have received massive support in sub‐Saharan Africa because of their potential to protect smallholder farmers against drought‐related maize yield losses. Using four waves of household farm panel data from six districts in Malawi, we examine the impact heterogeneity of this technology on maize productivity using a continuous treatment approach. We find strong evidence of positive correlation between maize yield and adoption of DT maize varieties. On average, an increase by one hectare in the area allocated to DT varieties increases maize yield by 547 Kg/ha representing a 44% increase from the average maize yield of 1,254 Kg/ha for our sample. Our findings give evidence that DT maize technology has potential to protect smallholder farmers against drought‐related production losses. Policies that promote increased allocation of maize area to DT maize hold potential to enhance food security. Smallholder farmers especially in drought‐prone areas should be encouraged to allocate at least one‐third of the maize plot to DT varieties while breeders continue with the efforts of breeding a DT variety that is not only drought tolerant but also adapted to all weather conditions. More importantly, the government should ensure provision of timely ex ante weather information to guide farmers on decision‐making with respect to maize varietal choices.     

Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies

Agrobiodiversity can provide natural insurance to risk‐averse farmers by reducing the variance of crop yield, and to society at large by reducing the uncertainty in the provision of public‐good ecosystem services, for example, CO₂ storage. We analyze the choice of agrobiodiversity by risk‐averse farmers who have access to financial insurance, and study the implications for agrienvironmental policy design when on‐farm agrobiodiversity generates a positive risk externality. While increasing environmental risk leads private farmers to increase their level of on‐farm agrobiodiversity, the level of agrobiodiversity in the laissez‐faire equilibrium remains inefficiently low. We show how either one of the two agrienvironmental policy instruments can cure this risk‐related market failure: an ex ante Pigouvian subsidy on on‐farm agrobiodiversity and an ex post payment‐by‐result for the actual provision of public environmental benefits. In the absence of regulation, welfare may increase rather than decrease with increasing environmental risk, if the agroecosystem is characterized by a high natural insurance function, low costs, and large external benefits of agrobiodiversity.     

Factors affecting farmers’ acceptance of conservation measures—A case study from north-eastern Germany

Intensive forms of agriculture have been proven to cause severe environmental effects, such as soil erosion by water and wind, or the pollution of ground and surface water with nutrients and pesticides contributing to the deterioration of natural habitats and the loss in biodiversity. In order to avoid or mitigate these detrimental environmental effects, a number of conservation measures can be undertaken by farmers. However, the adoption of these measures is highly dependent on the assumed benefits and risks attached as well as the personal perception and attitude of the individual farmer.This paper presents the outcome of a survey conducted in north-eastern Germany aimed at analysing farmers’ acceptance of different conservation measures. Eleven farmers, managing more than 80% (about 13,000 ha) of the agricultural land in the chosen case study region were interviewed. Respondents were asked about their personal experiences with different environmental measures and requested to assess these measures, e.g., regarding costs, time and labour demands, attached risks, or effectiveness. They also ranked these factors in terms of importance for decision making on adoption or rejection of a new measure. The findings show that, despite of the general assumption that farmers’ decisions are mostly driven by economic rationality, costs were not the most important factor. Other factors, like associated risks, effectiveness, or time and effort necessary to implement a certain measure were equally or even more important depending on the specific situation.