Does Choice Context Affect the Results from Incentive‐Compatible Experiments? The Case of Non‐GM and Country‐of‐Origin Premia in Canola Oil

We seek to design and implement a WTP elicitation instrument closely resembling an actual grocery shopping experience. An incentive-compatible choice experiment is used to elicit values for a non-GM attribute and a country-of-origin attribute of Canola oil. The choice context is varied to assess whether revealed-preference choice experiments are affected by choice variety. A median premium for non-GM Canola oil is found to approximate C$0.45 or C$0.62/liter according to the choice variety context; different country-of-origin effects are also found as choice context varies. Hypotheses as to why these significant effects of choice contexts occur are suggested.
Nous cherchons à concevoir et à mettre en application un instrument de révélation de la VDP qui ressemble étroitement aux choix que fait un consommateur lorsqu'il effectue son marché. Nous avons utilisé une méthode expérimentale compatible avec les incitations des participants afin de découvrir la valeur accordée à deux caractéristiques de l'huile de canola: non génétiquement modifiée et étiquetée selon le pays d'origine. La liste des choix est variée afin d'évaluer si les préférences révélées sont influencées par la gamme de choix. La prime médiane de l'huile de canola non génétiquement modifiée est d'environ 0,45 $CAN ou 0,62 $CAN le litre selon les choix proposés. Différents pays d'origine figurent aussi dans cette liste de choix. Nous avons formulé des hypothèses quant aux raisons pour lesquelles la gamme de choix a des effets importants.     

Are medium‐scale farms driving agricultural transformation in sub‐Saharan Africa?

This study presents evidence of profound farm‐level transformation in parts of sub‐Saharan Africa, identifies major sources of dynamism in the sector, and proposes an updated typology of farms that reflects the evolving nature of African agriculture. Repeat waves of national survey data are used to examine changes in crop production and marketed output by farm size. Between the first and most recent surveys (generally covering 6 to 10 years), the share of national marketed crop output value accounted for by medium‐scale farms rose in Zambia from 23% to 42%, in Tanzania from 17% to 36%, and in Nigeria from 7% to 18%. The share of land under medium‐scale farms is not rising in densely populated countries such as Kenya, Uganda, and Rwanda, where land scarcity is impeding the pace of medium‐scale farm acquisitions. Medium‐scale farmers are a diverse group, reflecting distinct entry pathways into agriculture, encouraged by the rapid development of land rental, purchase, and long‐term lease markets. The rise of medium‐scale farms is affecting the region in diverse ways that are difficult to generalize. Findings indicate that these farms can be a dynamic driver of agricultural transformation but this does not reduce the importance of maintaining a clear commitment to supporting smallholder farms. Strengthening land tenure security of local rural people to maintain land rights and support productivity investments by smallholder households remains crucial.     

India's post‐green‐revolution agricultural performance: what is driving growth?

Following a period of poor performance in the 1990s, India's agricultural growth rate has reaccelerated in the 2000s. Some believe the reacceleration has been a product of intensified investment, which in turn has spurred yield growth. Others suggest it is because India's newly wealthy citizens have demanded greater product diversification. To examine these hypotheses, we use growth accounting techniques in conjunction with more complete agricultural production data than in past studies to construct state, regional, and national output, input, and total factor productivity quantity indexes, which can be decomposed into their underlying sources. Sectoral performance evaluation suggests that, since 1980, output growth has diffused away from the northern “grain belt” and toward high‐value agriculture in traditionally less‐productive regions. Productivity growth, rather than resource use, has accounted for these geographical and intensity shifts. The growth burst has not, as the literature has primarily argued, been uniquely explainable by yield growth or product diversification but by a variety of factors, including area expansion. For example, the contributions of irrigation technologies permitting double‐cropping have until now been largely ignored.     

Can willingness‐to‐pay values be manipulated? Evidence from an organic food experiment in China

Human behaviors are driven by implicit and explicit motives. Psychologists have developed two main tools, namely time pressure and cognitive load, to disentangle the two motives. This implies values of willingness to pay (WTP) may be sensitive to time pressure and cognitive load levels in practice. An experiment with 233 students was conducted in China to study the willingness to pay for organic food with consideration of different time pressures and cognitive load levels. Results show that (1) increasing cognitive load could significantly reduce consumers’ WTP for organic food; and (2) time pressure does not have a significant impact on WTP values. Such results suggest researchers should be particularly cautious about the cognitive load situations of respondents during a WTP survey.     

Are In‐House and Outsourcing Innovation Strategies Correlated? Evidence from the European Agri‐Food Sector

We analyse European agri‐food firms’ choices about innovation in‐house or through outsourcing and provide empirical evidence about the correlation between these strategies. The relationship between the innovation strategy and firm‐, industry‐ and innovation‐specific characteristics is analysed through a bivariate probit model, which uses firm data from the EFIGE Bruegel‐UniCredit dataset. Transaction cost, resource base and knowledge governance arguments are used to explain the choice of innovation strategy. Our results show that the decisions to innovate in‐house or through outsourcing are independent from each other. In addition, we find that several organisational characteristics such as communication systems, human resource practices and specialisation are likely to influence both strategies. Conversely, organisational characteristics such as the allocation of authority and the business network do not seem relevant in determining the innovation strategies of the European agri‐food sector.     

A Holistic vs. an Attribute‐based Approach to Agri‐Environmental Policy Valuation: Do Welfare Estimates Differ?

Different economic valuation methodologies can be used to value the non‐market benefits of an agri‐environmental scheme. In particular, the non‐market value can be examined by assessing the public’s willingness to pay for the policy outputs as a whole or by modelling the preferences of society for the component attributes of the rural landscape that result from the implementation of the policy. In this article we examine whether the welfare values estimated for an agri‐environmental policy are significantly different between an holistic valuation methodology (using contingent valuation) and an attribute‐based valuation methodology (choice experiment). It is argued that the valuation methodology chosen should be based on whether or not the overall objective is the valuation of the agri‐environment policy package in its entirety or the valuation of each of the policy’s distinct environmental outputs.     

Can satellite‐based weather index insurance improve the hedging of yield risk of perennial non‐irrigated olive trees in Spain?*

Olive oil yields fluctuate strongly due to their dependence on sufficient precipitation. An interesting option to hedge the yield risk in olive cultivation could be satellite‐based weather index insurance. Therefore, we implement index insurance as a hedging alternative for non‐irrigated olive groves using MODerate‐resolution Imaging Spectroradiometer (MODIS) satellite data. For this purpose, we focus on the Spanish region of Andalusia, given its importance in olive production at the international level. We calculate three satellite indices: the Vegetation Condition Index (VCI), the Temperature Condition Index (TCI) and the Vegetation Health Index (VHI). Meteorological indices related to temperature and precipitation are used as benchmarks. Firstly, we estimate the periods that have the greatest influence on the critical vegetative phase of olives, which extends from March to September. Based on the indices, insurance contracts are designed using a copula approach, which is then employed to evaluate their hedging effectiveness. On average, the hedging effectiveness of VCI‐, VHI‐ and TCI‐based weather index insurance contracts amounts to 38 per cent, 38 per cent and 29 per cent, respectively. Moreover, VCI‐ and VHI‐based weather index insurance contracts outperform traditional weather index insurance contracts based on precipitation (by 29 per cent) and temperature (by 16 per cent) indices.     

Does It Matter Who Verifies Production‐Derived Quality?

Food quality attributes arising from farming methods are of increasing interest to many Canadians, examples include environmentally sustainable production practices, humane animal treatment, organic, etc. The credence nature of these attributes necessitates some form of quality assurance to provide credible signals to consumers that these attributes are present. This paper examines trust in private, third‐party, and government organizations to provide credible quality signals for attributes that derive from on‐farm production methods, or “production‐derived” quality attributes. A nationwide survey reveals that farmer, third‐party, and government organizations are similarly trusted to provide accurate information about farming methods, while government standards relating to environmental sustainability were perceived as most effective. Data from a discrete choice experiment are used to explore attitudes toward pesticide‐free and environmentally sustainable quality claims in a bread product, and in particular whether it matters who verifies those quality claims. Results obtained using a latent class multinomial logit model reveal a distinct pattern of heterogeneity in consumer attitudes toward production‐derived quality attributes and toward the verification of those attributes. Those respondents who most value production‐derived food quality also receive the highest utility from government verification and significant negative utility from supermarket or third‐party verification. This segment of Canadian consumers has a clear preference for a more proactive government role in facilitating credible quality assurances for production‐derived quality attributes. In contrast, the source of quality verification was far less important to those consumers holding weaker preferences for production‐derived quality. Les attributs de qualité des aliments liés aux pratiques agricoles, telles que les pratiques de production écologiquement viable, le traitement sans cruauté des animaux, l’agriculture biologique, etc., intéressent de plus en plus de nombreux Canadiens. Comme ces attributs reposent sur la croyance des consommateurs, une certaine forme d’assurance de la qualité est nécessaire pour envoyer aux consommateurs des signaux crédibles sur la présence de ces attributs. Le présent article examine la confiance dans la capacité des organismes privés, des tierces organisations et des organismes gouvernementaux à fournir des signaux de qualité crédibles pour des attributs liés aux pratiques de production à la ferme, c’est‐à‐dire des attributs de qualité dérivés de la production. Dans un sondage pancanadien, les producteurs agricoles, les tierces parties et les organismes gouvernementaux ont obtenu un degré de confiance similaire dans leur capacitéà fournir de l’information précise sur les pratiques agricoles, tandis que les normes gouvernementales visant à assurer la viabilité de l’environnement ont été perçues comme étant les moyens les plus efficaces. Nous avons utilisé des données tirées de la méthode des choix discrets pour analyser les points de vue concernant les allégations de qualité«sans pesticides et production écologiquement viable» accordées à un produit panifié et pour déterminer si le type d’organisme chargé de vérifier ces allégations revêt une importance ou non. Les résultats obtenus à l’aide d’un modèle logit multinomial à classes latentes ont révélé une hétérogénéité marquée des points de vue des consommateurs concernant les attributs de qualité dérivés de la production et la vérification de ces attributs. Les répondants qui appréciaient le plus les attributs de qualité dérivés de la production ont également indiqué qu’ils retiraient la plus grande utilité de la vérification effectuée par un organisme gouvernemental et une utilité significativement négative de la vérification effectuée par des supermarchés et des tierces organisations. Ce segment de consommateurs canadiens a montré une préférence marquée en faveur d’un rôle plus proactif du gouvernement pour donner une assurance crédible des attributs de qualité dérivés de la production. En revanche, le type d’organisme chargé de la vérification de la qualité avait une moindre importance pour les consommateurs qui ont montré de faibles préférences pour la qualité dérivée de la production.     

Do wheat futures returns exhibit long‐range dependence?

The efficient market hypothesis, where asset prices follow a random walk and incorporate all relevant information, is often invoked in financial economics. There is some evidence however to suggest that some asset prices do not follow random walks but display long‐range dependence. Such systematic behavior of past returns is of interest to traders. This article examines long‐range dependence in wheat futures prices using rescaled range analysis and the Hurst exponent. Since this estimate is biased when long‐range dependence is absent and its distribution is unknown, a Monte Carlo simulation approach is proposed. Results show that wheat futures prices show no evidence of long‐range dependence and there are no profitable trading rules.     

‘Deal’ or ‘No Deal’? Impacts of Alternative Post‐Brexit Trade Agreements on UK Agriculture

Brexit will have important implications for UK agricultural commodity markets due to potentially significant changes to trade flows. We quantify the sectoral impacts on UK agriculture of three illustrative scenarios, which capture a broad range of potential trade arrangements: Bespoke Free Trade Deal , WTO Default and Unilateral Trade Liberalisation . It is estimated that the projected market impacts are relatively small if the UK negotiates a Bespoke Free Trade Agreement with the EU. The projected impacts are much greater under the two other scenarios, which capture potential trade arrangements if ‘no deal’ is reached. The high tariffs imposed under the WTO default scenario lead to significant adjustments in trade between the UK and EU‐27, with the impact on the domestic UK market depending on whether the UK is a net importer or a net exporter of the relevant commodity. All sectors experience price and production declines under the trade liberalisation scenario in which the UK unilaterally sets tariffs on imports from both the EU‐27 and the rest of the world to zero; the impacts are particularly severe in the beef and sheep sectors where international competition is very strong.     

Payments for environmental services to promote “climate‐smart agriculture”? Potential and challenges

Payments for environmental services (PES) have gained wide popularity as approaches to promote environmentally friendly land use or agricultural production practices. Yet academics have also voiced concerns against seeing PES as a panacea. This article discusses whether PES is an appropriate and promising approach to promote so‐called “climate‐smart agriculture” (CSA) practices, which we define as agricultural production practices that contribute to CO₂ emission reductions and/or removals and provide benefits to farmers via increased productivity and profits and reduced vulnerability to climate change. PES appears most promising for the promotion of CSA practices in small‐scale farming contexts with low incomes. Effective design, however, requires solid estimates of cost and benefit flows from CSA adoption over time, accounting for differences in socioeconomic and ecological conditions, and addressing the risk of leakage. Funding for such PES will likely have to come from public sources, and seems most promising where synergies with other objectives such as agricultural development, food security, and climate adaptation or other environmental services exist. The potential of alternative approaches for CSA support such as taxation with rebates for CSA practices, CSA‐related investment support such as microcredits, and hybrid approaches such as conditional microcredit should be further investigated.     

Consumers’ Preferences for Bread: Transgenic,Cisgenic, Organic or Pesticide‐free?

Consumers are apprehensive about transgenic technologies, so cisgenics, which limit gene transfers to sexually compatible organisms, have been suggested to address consumer concerns. We study consumer preferences for rye bread alternatives based on transgenic or cisgenic rye, grown conventionally or without the use of pesticides, relative to traditionally bred rye, grown with conventional or organic farming methods. Stated preference (SP) data from a choice experiment are combined with revealed preference (RP) data from market purchases from the same respondents. Results show that respondents prefer pesticide‐free production methods, and that while cisgenics is preferred over transgenics, the majority of respondents favour traditional breeding methods. The distribution in preferences suggests that some respondents prefer bread from cisgenic crops produced without pesticides over traditional crops produced using pesticides. Preferences for organic bread are stronger than for pesticide‐free products. From a policy perspective results suggest that excluding cisgenics from mandatory labeling in the EU, or including it in the voluntary non‐GM labelling in the US, would cause welfare losses for consumers.     

Cheating? The Case of Producers’ Under‐Reporting Behavior in Hog Insurance in China

Information asymmetry exists in virtually every insurance setting. The institutional arrangement of hog insurance in China offers a unique opportunity to investigate the farmer's behavior of under‐reporting the actual number of finished hogs on one hand, and the insurer's efficiency in determining the actual numbers on the other. Using data on 444 hog operators synchronized from farm production survey and insurance records, results showed that farmers report on average 11.5% fewer hogs to the insurance company. The level of under‐reporting is positively associated with the size of operation. Farmers with longer farming experience and more conservative risk attitude report more accurately. The under‐report behavior is also partially attributed to a farmer's limited capacity of accurate estimation. Due to information barrier, the insurance company is only able to recover 18.6% of the under‐report at the indemnity payment stage. Results are robust after controlling for potential sample selection problems. It is suggested that technical supports, public programs and premium incentive designs in repeated insurance should be considered to promote more accurate reports.     

Worth the Risk? The Behavioural Path to Well‐Being

There is increasing interest in the ‘economics of happiness’, reflected in the volume of articles appearing in mainstream economics journals exploring the major determinants of self‐reported well‐being. We contribute by exploring the factors influencing how satisfied farmers are with their quality of life. We find that farm income, subjective perceptions relating to the adequacy of household income, debt, health and personal characteristics such as age and relationship status are significantly associated with farmers’ self‐reported life satisfaction. While significantly associated with farm income, farm structural variables such as farm size, farm type and the presence of a farm successor were not found to be significantly related with life satisfaction. Our results also suggest that farmers who are more risk averse enjoy significantly lower levels of both life satisfaction and farm income than their more risk seeking or risk neutral counterparts. We suggest that, in the same way that risk aversion inhibits farmers from making choices that could lead to an increase in their income, it may also constrain farmers (and the wider public at large) from engaging in certain types of behaviours that could lead to an increase in their self‐reported quality of life. Finally, we find that while farm income is significantly related to self‐reported life satisfaction, the direct correlation between these variables is weak, suggesting that farmer life satisfaction can be distinct from business success.     

Is fertiliser use inconsistent with expected profit maximization in sub‐Saharan Africa? “Evidence from Nigeria”

This article revisits a conventional wisdom that inorganic fertiliser use across sub‐Saharan Africa is too low. This expectation that more farmers should be using inorganic fertiliser, and at higher rates, implies it is profitable to use rates higher than observed if farmers are rational expected profit maximisers. We obtain consistent estimates of the effects of applied nitrogen on rice production. We find the yield response to applied nitrogen to be low in the main rice growing farming system. Farmer behaviour is not inconsistent with expected profitability which is limited by a low yield response to applied fertiliser, high transportation costs, and low selling prices for rice in rural areas. In particular, we do not find any farmers for whom applied nitrogen is profitable that are not using fertiliser in the study sample for each of our survey years (2010 and 2012).     

How do informal farmland rental markets affect smallholders’ well‐being? Evidence from a matched tenant–landlord survey in Malawi

We estimate the efficiency and equity returns to farmland rental markets in Malawi using a matched tenant–landlord survey of smallholder farm households in four districts. Our sample allows us to more fully observe the landlord side of the rental market, which is almost always missing in previous studies. Our results suggest that land rental markets promote efficiency by facilitating a net transfer of land to more productive farmers. We also find that land rental markets promote equity as conventionally defined in the land markets literature, that is, by transferring land from land‐rich households to land‐poor households, and from labor‐poor to labor‐rich households. However, our study identifies some important challenges for land rental markets in this context. First, we find that tenants in our sample are wealthier than their landlord counterpart on average in all dimensions other than landholding. In addition, most landlords report the motive for renting out their land as either the need for immediate cash, or the lack of labor and/or capital to cultivate the plot that was rented out. These findings align with concerns about potential “stress renting” by poor landlords and suggest the value of defining equity along a broader set of dimensions other than simply equalizing the distribution of farmland and labor.     

Cereal price shocks and volatility in sub‐Saharan Africa: what really matters for farmers’ welfare?

The lack of information as well as some misperceptions about the distinction between the welfare consequences of higher versus more volatile cereal prices has limited the effectiveness of policy interventions during the recent food crises in many developing countries. This article proposes an integrated empirical strategy to investigate and compare the different effects of these two phenomena and tests it using nationally representative household survey data from four sub‐Saharan countries. Results show that the negative impacts of a cereal price increase substantially outweigh the effects of price volatility on household welfare across the entire income distribution. The amplitude and the distribution of those effects depend heavily on specific factors, such as: the weight of food consumption over total expenditure; the budget share devoted to cereals; the substitution effect among food groups; and the relative number of net sellers versus net buyers accessing the market. We also show that volatility mainly harms the poorest quintile of the population.     

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.