Are Food Certification Costs Misestimated? Exporter‐Perspective on the European Standard

Food safety regulations aimed at controlling food contamination have sometimes been criticised as excessive burdens, disadvantaging smaller firms and exports from developing nations. Reported food safety expenditures appear relatively small (from <1 to 7% of the value of production) but can erode profit margins for many firms. This article responds to claims that reported firm‐level expenditures do not reflect true costs of compliance with food safety systems. We estimate incidental cost savings and uncounted costs associated with Hazard Analysis and Critical Control Points (HACCP) certification among Philippine seafood producers by modelling the interactions between conventional production and food safety expenditures using translog cost functions. Results indicate a significant underestimation of reported HACCP costs by an average of US$1.10 for a dollar of reported expenditure.     

Cross-licensing agreements in presence of technological improvements

This study investigates the relationship between technologies that firms expect to achieve after cross-licensing (CL) and their incentives for signing CL agreements in a multiproduct-firm setting. Results indicate that if markets are bounded substantial technological improvements that result in removal of firms’ current products from the market may in fact reduce firms’ incentives to negotiate a CL deal. This may also give firms an incentive to agree upon a tacit collusion by which they limit the utilization of CL technologies. However, when markets are unbounded, the prospect of capturing new markets and charging royalty fees can significantly increase firms’ incentives for CL. The rationale behind our modeling assumptions is discussed using example from agriculture biotechnology industry.     

The sustainability of timber production from Eastern Amazonian forests

Although the regulations are imperfectly enforced, logging firms in the Brazilian Amazon are subject to forest management regulations intended to reduce environmental damage and protect future forest productivity. Additionally, voluntary best practices firms adopt to achieve environmental performance that exceed regulatory requirements are largely limited to reduced impact logging (RIL) systems that reduce harvest damage relative to conventional logging systems used by a large majority of firms in the region. Existing regulations combined with best practices may not be adequate to ensure sustained yields. This inadequacy is an important issue as Brazil implements an ambitious program of forest concessions on public lands. We analyze the profitability and environmental outcomes of best logging practices and proposed sustainability requirements. We propose two operational definitions of sustainability (the first focusing on sustaining stand-level timber volumes and the other focusing on sustaining species-level volumes within the stand) based on sustaining timber inventories across cutting cycles rather than on sustaining overall harvest yields. RIL is shown to be profitable for loggers and increase the timber available for future harvests. While volume predicted to be available for the second and third harvests are significantly lower than the available timber in the unlogged forest, the second and third harvests are projected to be profitable and have the potential for sustainability despite high opportunity costs. However, as harvesting is repeated into the future, results show the composition of the harvest shifts from higher-value shade-tolerant and emergent species toward a greater reliance on longer-lived, lower-value pioneer species. This shift may create pressure to expand the forest base under management in order to continue to supply high-value species or increase the risk of timber trespass in conservation units and areas under community or indigenous management.     

Effect of land-use conversion on C and N distribution in aggregate fractions of soils in the southern Loess Plateau,China

The purpose of this study was to assess the effect of grassland (GL) conversion to cropland (CL) and cropland conversion to forest (FL) and orchard (OL) on soil C and N distribution in dry aggregate size fractions in Nihegou catchment of the southern Loess Plateau, China. Four main land-use changes were analyzed in different agronomic management systems in 2006. The soil is wind-deposited loessial parent materials with a rather homogeneous silty clay loam texture classified as Calcic Cambosols. The GL was long-term over-used grassland. The CL was changed from GL after 33 years tillage with conventional tillage and fertilizer. The FL and OL originated from long-term CL after 23- and 7-year planted, respectively. Samples were taken at soil depths of 0–20 cm and 20–50 cm and were subjected to a physical fractionation process by way of aggregate size. Soil aggregate size fractions, total C and N contents and distributions were determined on all soil samples. Three dry aggregate fractions of very coarse (2.0–0.2 mm), coarse (0.2–0.05 mm) and fine (<0.05 mm) were obtained by shaking and sieving for 20 min. After 33 years of tillage, CL had 22% lower content of very coarse aggregates (2.0–0.2 mm) and 34% higher contents of fine aggregates (<0.05 mm) than GL. FL and OL soils had increased 9% and 10% contents of very coarse aggregates, and decreased 2% and 8% contents of fine aggregates compared to the CL. C and N losses in whole CL soils were 31% and 26% higher than those in GL. However, conversion of land uses from CL to FL (after 23 years) and OL (after 7 years) has increased C and N stocks by 76% and 40% in FL soils and by 66% and 63% in OL soils, respectively. This accessorial C and N stocks were higher in very coarse aggregate fractions (1.10 kg C m⁻² and 0.13 kg N m⁻² in FL soils, 1.43 kg C m⁻² and 0.17 kg N m⁻² in OL soils); moreover, the C and N stocks in fine aggregate fraction increased by 8% and 33% in FL soils and by 58% and 69% in OL soils, respectively. This results showed that C and N turnover and loss in aggregate fractions of this silty clay loam soils was very fast. Conversion of land uses from CL to FL and OL has obviously recovered the soil structure, and improved soil quality.     

Courts and contract enforcement in transition agriculture: theory and evidence from Poland

The paper investigates theoretically and empirically the role of courts for contract enforcement in transition agriculture. In a survey of 306 Polish farmers conducted in 1999, only 38.5% respondents reported to believe that they could use courts to enforce contracts with their most important customer. Furthermore, those who believed the legal system could be used would accept significant financial losses before taking action. We develop a theoretical model, based on the costs and benefits of court enforcement, which captures the boundary between contracts to be regarded as 'enforceable' and 'not-enforceable' and, simultaneously, the threshold of taking legal action. The empirical analysis strongly supports our model: (1) the farmers' responses can be explained by cost-benefit calculations regarding the use of courts, (2) the legal 'enforceability' of contracts depends not only on the efficiency of the legal system but also on the attributes of the transaction, the contracts and the relationship between buyer and seller and (3) the threshold of taking legal action is significantly influenced by indirect costs of court enforcement, such as the disruption of a valuable business relationship, and by the availability of alternative enforcement mechanisms.     

论渔业自然资源特性对ITQ制度交易成本的影响

本文在阐述我国海洋捕捞渔业自然资源特性的基础上,通过剖析它对个体可转让配额制度交易成本的影响,提出相应建议:我国单一鱼种产量低的特征会使得渔民在遵守该制度时的守法者成本上升;海洋生物组成复杂多样的特征会使当局确定总可捕量的信息搜寻成本、分配配额的决策成本和执行成本上升,会使渔民因兼捕性增强而需要为完成交易多付固定交易成本、信息搜寻成本和讨价还价成本;资源的地域差异性较大一方面将增加专用资产的投资而增加交易成本,另一方面将降低区域间配额分配难度而降低交易成本;海域的宽阔和海岸带广延性将导致当局的监督成本增加.     

The Calculation of returns to research in distorted markets: Comment

In a recent article, Oehmke reported that a high internal rate of return for investment in research when the interaction between research and price policy costs was disregarded could become very low or even negative when the effects of research on the costs of price policy were considered. In this paper, the social returns from research in the presence of the price policies considered by Oehmke are reexamined using a simple geometric approach. The analysis suggests that an output subsidy in a small importing economy, an output subsidy in a closed economy, and a target price in a large exporting economy will on Oehmke's assumptions - cause only small reductions in the internal rate of return from investment in research. This implies that the apparent underinvestment by governments in agricultural research cannot be explained away by a large upward bias, known to governments, in measured rates of return due to failure to account for interactions between research and the costs of price policy measures.     

The Direct and Indirect Costs of Food-Safety Regulation

The compliance costs of the Pathogen Reduction Hazard Analysis Critical Control Program (PR/HACCP) rule have been controversial. Previous reports have used limited data to evaluate its overall and component costs. This paper addresses those deficiencies by examining compliance costs with data from a national survey of meat and poultry plants. Results indicate that ( a ) regulation favors large, more specialized plants over small, diversified ones, ( b ) private actions incur considerable costs, and ( c ), except for chicken slaughter, Federally mandated processing tasks are 160–500% more costly than allowing plants to meet standards using whatever food-safety technology they choose.     

The components of the bid‐ask spread: Evidence from the corn futures market

This article examines whether USDA announcements and commodity index fund rolling activity have an impact on liquidity costs, measured by the bid‐ask spread. Using Huang and Stoll's (1997) model of liquidity costs, we estimate whether changes to liquidity costs are driven by its adverse selection, inventory, or order processing components. Commodity index fund roll activity reduces the asymmetric information cost component of liquidity cost due to an increased proportion of noninformation‐based trading, but the inventory cost component increases as (mostly long only) commodity index funds sell their nearby positions and buy the first deferred contract—raising liquidity providers’ risk of building a position. The sum of these two effects is that liquidity costs remain low during index fund roll periods, averaging one “tick” (0.25 cents). On USDA report release days, we find that informed traders raise the asymmetric information component of liquidity costs in the first hour after release, but the inventory cost component is reduced due to the increase in volume. Similar to index fund roll activity, liquidity costs on USDA report release days remain low, averaging one “tick”. Our findings that liquidity costs are minimally changed during USDA report releases and commodity index fund roll periods is consistent with other recent research on liquidity costs, but we show that what drives liquidity costs differs substantially depending on the circumstances surrounding daily trading.     

Economic Welfare Impacts of Foot‐and‐Mouth Disease in the Canadian Beef Cattle Sector

A foot‐and‐mouth disease outbreak, although having a low probability of occurrence, results in losses of export markets and introduces considerable potential disease management and eradication costs. We develop a dynamic model that integrates beef cattle production, disease dissemination, domestic consumption, and international trade and captures the intertemporal economic welfare impacts of mitigation measures. The model is applied to the case of a hypothetical outbreak in Canada to capture changes in producer profits, consumer price, and government costs due to the outbreak and sums these to measure changes in total economic welfare of the beef industry. Mitigation scenarios are reported for stamping‐out, movement controls, vaccination, and preemptive slaughter.     

STANDARDS VERSUS PRICES REVISITED: THE CASE OF AGRICULTURAL NON-POINT SOURCE POLLUTION

This paper demonstrates that the conventional neoclassical arguments for recommending a uniform discharge tax in preference to a uniform discharge standard are founded on highly restrictive and unrealistic abstractions of the pollution process. Relaxation of the assumptions reveals that the uniform standard outperforms the uniform tax in controlling ambient pollution levels over a potentially wide range of parameter values. The results of a study on agricultural sediment control are reported. It is argued that this pollution process is predisposed to the conditions that favour the ‘cross-over’ in efficiency ranking between the two policies. These conditions are a high correlation between discharge abatement costs and pollution transport coefficients, and high variability in pollution transport coefficients relative to the interfirm abatement costs.     

Agency costs of vertical integration—the case of family firms,investor‐owned firms and cooperatives in the French wine industry

Vertical integration theory has long suggested internal costs related to changes in incentives due to vertical integration, which means that vertical integration may lead to agency costs. In this work, we specify the notion of agency costs of vertical integration and extend Ang et al. (2000)'s measurement of agency costs to provide an empirical assessment of these costs in the French wine industry. Our econometric analysis finds that the agency costs of vertical integration may reach 2–3% of sales. It also showed that operating expenses of vertical integration are lower for cooperatives than for other firms, while vertical integration is less rewarding for them. This raises questions on the relation between agency costs in cooperatives and their performance.     

Rewarding carbon sequestration in South-Western French forests: A costly operation?

The extension of rotation lengths in forests has been proposed as an option for increasing carbon storage and contributing to climate change mitigation. This paper presents the results of a case study conducted on forests located in the southwest of France. The aim of this research was to assess the cost effectiveness of a subsidy/tax system on carbon fluxes. First, it is shown that such a mechanism leads forest owners to extend rotation lengths. However, cost effectiveness analysis shows that: (1) marginal social costs are more expensive than the private marginal costs of carbon sequestration; (2) marginal costs are higher when carbon stocks are discounted, ranging from 170.1 €/tC to 719.8 €/tC with discounted carbon stocks; and from 38.8 €/tC to 78.4 €/tC with undiscounted carbon stocks; (3) marginal costs are in the range of measures of the social value of carbon for France; (4) marginal costs increase with timber prices and increase with discount rate.     

Cost-benefit analysis of the Dutch nature policy: Transaction costs and land market impacts

This paper analyses the financial and economic costs and benefits of the large scale National Ecological Network (NEN) nature conservation project in the Netherlands, taking into account transaction costs and land market impacts of different institutional arrangements. The net financial costs associated with achieving the current plan are equivalent with an annual amount €876 per hectare. Of the costs, transaction costs amount about 16% or €140 per hectare. The substantive land purchases involved in the plan will lead to land price increase of 20%. Nature management by agriculture turns out to be a relatively cheap option.     

Who Pays the Costs of Non-GMO Segregation and Identity Preservation?

Our aim is to explore who pays the costs and who reaps the benefits of maintaining a dual-market system of genetically modified organisms (GMOs) and non-GMOs. We analyze the welfare effects of the introduction of consumer "hatred" given GMO technology and the introduction of GMO technology given hatred. Making alternative assumptions of competitive and then monopolistic supply, we recognize that identity preservation (IP) of non-GMOs creates costs for IP and non-IP producers. We model these costs as depending on the sizes of the two supply channels.     

Evaluating the economic impact of quality-reducing,seed-borne diseases: Lessons from Karnal bunt of wheat

Estimates of aggregate disease costs can be used for assigning research resources or to evaluate control measures. Most diseases cause production losses, but others affect quality and marketability. Seed-borne diseases also cause problems for the seed production and distribution industry. The aim in this paper is to examine issues relating to the economic impact of a quality-reducing, seed-borne disease, and to highlight differences compared to non-seed-borne diseases affecting yield only. Economic evaluation of quality-reducing, seed-borne diseases needs to incorporate impacts of trading restrictions such as quarantines or embargoes imposed by purchasers. The costs of measures taken to control diseases also represent part of the economic impact of the disease. Full economic costs of a disease include the direct (yield and quality) costs and costs of the control measures. The costs of Karnal bunt of wheat in Mexico were found to include many control costs that have often been overlooked. The optimal amount of resources to invest in controlling a disease depends on the likely annual costs of the disease and of control measures. Before implementing disease control policies, both the costs and the benefits of the policies need to be considered, taking the risks of each option into account, to ensure that the policy itself does not impose greater costs than the uncontrolled disease.     

A CGE analysis of trade costs in the Russian agrofood sector

Ten years after the end of central planning, enormous interregional price differences indicate that Russian food markets are not well integrated spatially. Trade potentials are thus not exploited, most probably because of high trade costs. Besides transport costs, transaction costs seem to play an important role as an impediment to interregional arbitrage. These transaction costs can be very high in transition countries due to underdeveloped market structures and weak public institutions. After subtracting transport costs from interregional price differences, large differences remain, particularly in the case of high‐value products. It is assumed that these residual price differences constitute the transaction cost component of total trade costs. The regional economic impact of different trade cost components is quantified using a bi‐regional computable general equilibrium (CGE) model. Simulations show that the results are quite different between the two stylized regions (East and West), depending on which trade cost component is reduced. While the welfare effects of varying customs tariffs and transport margins are rather limited, lower transaction costs of trade seem to be a promising way to achieve a better functioning food market in Russia.     

Financial costs and benefits of a program of measures to implement a National Strategy on Biological Diversity in Germany

The implementation of the National Biodiversity Strategies and Actions Plans (NBSAP), as required by Article 6 of the UN Convention on Biological Diversity (CBD), would improve the base for political decisions by quantifying the costs and benefits of biodiversity conservation in monetary terms and by illustrating the benefits of related ecosystem services (ESS). However, so far the costs and benefits of the NBSAP have not been routinely estimated. This paper presents results from research quantifying the financial costs and benefits of implementing a set of measures based on the National Strategy on Biological Diversity in Germany (NBS). Based on the NBS and the Quality Status Reports of the EU Habitat Directive, a conservation program was developed consisting of land use changes for six ecosystems/land use types: forests, arable land, grassland, peatlands, wetlands and dry habitats. In addition to the benefits of maintaining biodiversity, two potential ESS benefits of the NBS, water purification and climate mitigation, are estimated as well as the financial costs of implementation. A nationwide contingent valuation study was undertaken to determine the benefits of maintaining biodiversity as a result of the conservation program. The benefits of the conservation program with regard to the ESS water purification are calculated for N-reduction in the leachate and based on abatement costs. The contribution of nature conservation to climate mitigation is calculated for the avoidance of greenhouse gas (GHG) emissions and based on damage costs. The results of the study indicate that the implementation of the NBS would lead to significant financial costs, but the benefits would exceed the financial costs of measures.     

The importance of managing the costs and benefits of bird activity for agricultural sustainability

The behaviour of wild animal species in agricultural landscapes may confer benefits to growers through the provision of ecosystem services (e.g. control of agricultural pests) or inflict costs through direct or indirect damage to crops or livestock. The literature on the costs that species inflict or the benefits they provide has evolved largely independently with few attempts to synthesize information across studies. However, managing cost–benefit trade-offs to maximize agricultural productivity while ensuring native species conservation is vital to the future of ecologically sustainable agriculture. Using birds as a case study, we review the two bodies of literature on the costs and benefits attributed to bird activity in agricultural landscapes. In each case, we examine the major types of costs (e.g. consumption of crops) and benefits (e.g. pollination of crops) and assess approaches to quantifying these in terms of changes in crop yield or monetary value. We then synthesize this information to examine options for balancing cost–benefit trade-offs through coordinated and integrated management strategies that consider all aspects of species activity in agricultural landscapes. Employing strategies that successfully balance costs and benefits is fundamental to future food security and agricultural sustainability.     

Estimating the Prevalence and Cost of Yield-Switching Fraud in the Federal Crop Insurance Program

Producers who manipulate and switch their reported crop-yields between separately insured units can increase their insurance indemnities substantially. A statistical model that identifies potential yield switching is developed. The unrestricted statistical model is singular and is identified by imposing a mixture of system-estimable and system-nonestimable restrictions. Lower bound estimates of yield-switching fraud incidence and costs are obtained by applying the model to 207,067 multiple unit producers who purchased crop insurance in 1998.