IMPACTS OF TAXES TO REDUCE AGRICHEMICAL USE WHEN FARM POLICY IS ENDOGENOUS

The economic impacts of policies to reduce water pollution from agriculture have been explored in a number of studies. A standard assumption in this literature is that farm income support policies are given. However, the modern public choice view of agricultural policy suggests that significant environmental initiatives in agriculture would likely be accompanied by changes in farm income policies to protect those with a significant stake in agriculture. We explore the potential effects of such compensating adjustments on the costs and effectiveness of taxes on polluting chemical inputs in US corn production. We find that compensating farm policy adjustments can greatly increase the costs and reduce the effectiveness of the environmental protection measure. The results also indicate the potentially high costs of poor policy co-ordination.     

Water pricing policies,public decision making and farmers' response: implications for water policy

The problems caused by water scarcity demand important changes in the criteria and objectives of water policies. The agricultural sector in Spain consumes up to 80% of all available hydric resources and the need to increase the efficiency of current uses of water in the agricultural sector is at the core of the country's national water policy. One alternative would be to resort to water pricing policies with the aim of providing incentives to save water consumption although it would inflict a certain degree of income losses to the farmers and raise the revenue collected by the water authorities. The objective of this research is to analyze the effect caused by the application of different water pricing policies on water demand, farmers' income and the revenue collected by the government agency. To undertake this analysis a dynamic mathematical programming model has been built that simulates farmers' behavior and their response to different water pricing scenarios. Empirical application of the model has been carried out in several irrigation districts in Spain covering varied farm regions and river basins. Results show that the effects of alternative pricing policies for irrigation water are strongly dependent on regional, structural and institutional conditions and that changing policies produce distinct consequences within the same region and water district. Thus, equivalent water charges would create widespread effects on water savings, farm income and collected government revenue across regions and districts.     

The Impact of Price Stabilizing Policies on the Risk Efficient Crop/Fallow Decisions of Wheat Farmers in the Brown Soil Zone of Saskatchewan

The micro-linkages between the crop/fallow decision and price-induced risk are examined for wheat producers located on the brown soils of Saskatchewan. Three generic price stabilization policies are defined. Based on a bio-economic simulation model, the risk-efficient FLEXCROP decision rules are selected, and their corresponding cropping patterns are assessed for each generic price stabilization policy. Assuming no subsidy component within the mandatory price stabilization program:
• risk lovers reduce cropped acreages by 0% to 4%, depending upon both the risk-aversion level and the stabilizing program and
• risk-averse producers increase cropped acreage from 10% to 35% over no price stabilization.     

Market Analysis,Technical Change and Income Distribution in Semi-Subsistence Agriculture: the Case of Bangladesh

For the first time, the model developed by Hayami and Herdt is applied to determine gains from modern varieties of rice in Bangladesh and the distribution of these gains between consumers and producers. The results suggest that consumers' surplus is much greater than it would have been had the high yielding crop varieties (HYVs) not been introduced. By keeping the real price lower than it would have been otherwise, the modern varieties have tended to be income equalizing for urban consumers. The Hayami-Herdt partial model even suggests that, given the relatively inelastic demand for rice in Bangladesh, the real cash income of producers has risen slightly as a result of these new technologies. In reality, however, the impact of these changes on incomes of farmers and the distribution of income between those involved in production is more complex. It is suggested that if a less partial view is taken and if account is taken of lower cost of obtaining home-consumed produce, the increase in income may be greater. In any event, there are dangers in using such a partial model to predict the developmental consequences of technological changes affecting a staple crop, and attention needs also to be given to the possibility that the supply curve may not have the simple form and pivot in the way supposed by Hayami and Herdt. While the Hayami-Herdt model is simple to apply, it is best used as a first approximation or starting point rather than a final solution. It ignores a number of criteria that could be important in assessing new agricultural technologies, such as their impact on the variability of benefits to producers and consumers and their consequences for sustainability of production. Furthermore, the Hayami-Herdt model does not deal specifically with changes in factor shares in farm production. Nor does it consider the impact on income distribution of the ownership and control of critical input like irrigation and imperfection in the rural credit market. It is pointed out in our paper that the adoption of HYVs has been associated with important variations in factor shares in Bangladeshi rice production. Analysis of available farm level data indicates that the relative share of labour has fallen, suggesting an uneven distribution of gains from technological changes between the owners of non-labour resources and those of labour resources. However, the absolute share of labour has increased, and it seems that rural employment has risen as result of the new technologies.     

Water access,farm productivity,and farm household income: Sri Lanka's Kirindi Oya irrigation system

Income differences attributed to differential access to water in irrigation systems are common. Prior studies of farm‐level water use in developing areas have typically been limited to using number of irrigations as a proxy for water use. We develop a volumetric measure in Sri Lanka's Kirindi Oya Irrigation System through recent farmer recall and use it in production function estimation and welfare analysis. Findings indicate substantial differences in water use by farms across seasons and across subareas of the irrigation district. Alternative plans for allocating additional water among seasons and subareas to elevate net rice revenues are examined. The recommended plan predicts higher net returns from rice and greater equality in the distribution of household income than would be generated if the additional water were allocated based on the current allocation criteria. Concurrent application of fertilizer at recommended levels would further increase net revenues and reduce income inequality.     

Technology,market policies and institutional reform for sustainable land use in southern Mali

To identify appropriate interventions that support sustainable land use; a farm household modelling approach is applied to analyze micro-economic supply reactions to various policy measures. The modelling framework links agro-technical and economic data, and takes both production and consumption decisions into account, allowing land use and production technology adjustments in accordance with farm household objectives. Different types of farm households are distinguished on the basis of their resource endowments, savings coefficients and time discount rate. Actual and alternative (sustainable) cropping and livestock activities for different weather regimes are defined for southern Mali. The effects on sustainable land use and expected farm household welfare of adopting alternative technologies and modifying prices, transaction costs, access to credit and land taxes are demonstrated. Even with full information on sustainable technologies, strong policy interventions are required to halt soil degradation. Structural policies proved to be more effective than price policies to reduce soil degradation while maintaining positive income effects. When prices are determined endogenously, structural policy loses some effectiveness as an incentive for sustainable land use due to the effect of additional supply on local cereal and meat Prices.     

Determinants of herbicide use in rice production in the Philippines

This study identifies farm‐specific and market factors affecting the adoption of herbicides and the level of herbicide use by rice farmers in the Philippines. This requires the application of a modified version of Heckman's two‐step method to estimate a random‐effects double‐hurdle model for unbalanced panel data. The age of the farmer, household size, and irrigation use are significant determinants of the decision of farmers to adopt herbicides as an alternative to manual weeding, while economic variables such as the price of herbicides, total income, and access to credit determine the level of herbicide use. Determinants of both adoption and level are land ownership, farm area, and the method of crop establishment. These results are potentially relevant when designing policies to reduce excessive herbicide use or to encourage the adoption of alternative weed control methods such as integrated weed management.     

Stop and Go Agricultural Policies with a Land Market

This article studies the design of farm policy in the presence of asymmetric information about farmers' productivity, a government objective to insure farmers a minimum "parity" income, an endogenous land rent, and diminishing returns on alternative (nonprogram crop) land uses. In this setting, acreage set asides are never part of an optimal farm policy, although compensated acreage limits are. When there are new farmer entrants who cannot be excluded from farm programs, optimal policy takes the form of a pure voluntary acreage limitation—or "buyout"—program in which high-cost producers participate and low-cost producers do not.     

Welfare Impacts of Alternative Public Policies for Agricultural Pollution Control in an Open Economy: A General Equilibrium Framework

A general equilibrium approach is used to evaluate the welfare impacts of alternative policies for reducing agricultural pollution in an open economy with preexisting distortions caused by income taxes and agricultural subsidies. The policies examined here include the removal of distortionary agricultural subsidies. We find that even though these distortions are small compared to others in the economy, removing them and imposing nitrogen reduction subsidies and/or output taxes can enhance welfare and reduce nitrogen pollution; thereby leading to a substantial double dividend. The relative efficiency of the alternative policies examined here depends on the level of the nitrogen reduction target.     

Rationale and Motivation of Agricultural Producers in Adopting Crop Rotation in the Northern Great Plains,USA

Despite several environmental and economic benefits of crop rotation, the adoption of this agricultural practice is relatively low. Understanding the reasons for low adoption is important from a sustainability policy perspective. This study explores the motivation, challenges, and sources of information of agricultural producers who participate in crop rotation practices in South Dakota, North Dakota, and Nebraska. The findings of a mail survey of 672 producers in these three states show that producers are familiar with the crop rotation practice. Economic profitability is found to drive motivation for crop rotation adoption. The results of a binary logistic regression model show that a producer who perceives that crop rotation is beneficial to farm profitability is 1.83 times more likely to adopt it than the producer who does not believe in its profitability to the farm. The lack of time or resources is the primary barrier to the adoption of crop rotation practice. This study provides additional evidence in support of the importance of farm profitability for the adoption of the practice of crop rotation. Understanding the rationale and addressing the challenges faced by agricultural producers would be useful in planning and policy making of sustainable agriculture.     

农业用水非农化对农户粮食生产用水行为的影响基于山东省728份农户调查数据

[目的]农户作为微观经营主体,其节水技术的采用将提高粮食生产用水效率,达到节约水资源与保证粮食生产的双重目的。通过分析农户粮食生产用水行为,探讨水资源短缺约束对农户粮食生产技术采用的诱致效应。[方法]文章基于2019年对山东省728份农户的调查问卷数据,以农户行为理论为基础,综合运用统计分析、Logit模型等方法,对农业用水非农化约束下农户的粮食生产用水行为进行分析。[结果]在农业用水非农化态势下,作为理性经济人的农户倾向于采用节水技术,以保证粮食生产。农户年龄、家庭农业劳动力人数、灌溉水源与灌溉方式对其节水技术的采用影响显著为负,农业年收入、小麦及玉米种植面积对农户节水技术的采纳行为影响显著为正。[结论]规模化经营是大型节水设施应用的基本条件,应当加快农地流转,推进粮食生产规模化经营,提高粮食灌溉的规模化和标准化水平;同时加快建立科学合理的农业水价改革制度,促进农民节约农业用水,以此实现水资源利用效率提高与粮食生产能力稳定的双重目标。     

Can economic incentives encourage actual reductions in pesticide use and environmental spillovers?

Chemical pesticides constitute an important input in crop production. But their indiscriminate use can impact negatively agricultural productivity, human health, and the environment. Recently, attention is focused on the use of economic incentives to reduce pesticide use and its related indirect effects. The aim of this work is to assess the effectiveness of different economic instruments such as taxes and levies in encouraging farmers to decrease pesticide use and their environmental spillovers. A policy simulation model is employed using data from Dutch cash crop producers including two pesticide categories that differ in terms of toxicity and pesticides’ environmental spillovers. Four different instruments were selected for evaluation: pesticide taxes, price penalties on pesticides’ environmental spillovers, subsidies, and quotas. The results of the study indicate that even high taxes and penalties would result in a small decrease in pesticide use and environmental spillovers. Taxes that differentiate according to toxicity do not lead to substitution of high‐ with low‐toxicity pesticides. Subsidies on low‐toxicity products are not able to affect the use of high‐toxicity products. Pesticide quotas are more effective in reducing pesticide use and environmental spillovers.     

Macro–micro feedback links of water management in South Africa: CGE analyses of selected policy regimes

The pressure on an already stressed water situation in South Africa is predicted to increase significantly under climate change, plans for large industrial expansion, ongoing rapid urbanization, and government programs to provide access to water to millions of previously excluded populations. This article employs a general equilibrium approach to examine the economy‐wide impacts of selected macro and water‐related policy reforms on water use and allocation, rural livelihoods, and economy at large. The analyses reveal that implicit crop‐level water quotas reduce the amount of irrigated land allocated to higher‐value horticultural crops and create higher shadow rents for production of lower‐value water‐intensive field crops, such as sugarcane and fodder. Accordingly, liberalizing local water allocation within irrigation agriculture is found to work in favor of higher‐value crops, and expand agricultural production and exports and farm employment. Allowing for water trade between irrigation and nonagricultural uses fuelled by higher competition for water from urbanization leads to greater water shadow prices for irrigation water with reduced income and employment benefits to rural households and higher gains for nonagricultural households. The analyses show difficult trade‐offs between general economic gains and higher water prices, which place serious questions on subsidizing water supply to irrigated agriculture, i.e., making irrigation subsidies much harder to justify.     

Risk preferences of commodity crop producers and specialty crop producers: An application of prospect theory

Producers’ decisions, such as crop insurance, contract agreement, and technology adoption, involve considerable risk and uncertainty. Particularly, specialty crop production is more vulnerable to risk and requires more intensive management than commodity crop production, while risk mitigation tools for specialty crop production are comparatively limited. We apply Prospect Theory (PT) to analyze risk preferences of U.S. producers, and further compare the preference differences between commodity crop and specialty crop producers. Reference dependent, diminishing sensitivity, loss aversion, and probability weighting, as well as certain farm characteristics and producer demographics, are found to have a significant impact on grower risk attitudes. In addition, we do not observe significant differences in the base PT estimates between commodity crop and specialty crop producers. However, the relationships between risk behavior and individual characteristics vary between the two types of producers, which shed lights on the development of agricultural policies and provide implications for the design of contract and insurance.     

An empirical assessment of the value of irrigation water: the case study of Murrumbidgee catchment*

Evaluation of value of irrigation water is essential for supporting policy decision making relating to investments in the irrigation sector, efficient allocation of irrigation water and water pricing and for crafting policies to compare the variable impacts of water reform within and across sectors of the economy. This paper asks the question of how much an established irrigator would pay for water and at what price farmers planning to expand the area they have under irrigation would consider paying for the right to access water. An analytical framework is developed to estimate the net present value of both annual and perennial agricultural activities in the Murrumbidgee catchment. Using these estimates the total value of water used in Murrumbidgee catchment is estimated. An aggregate water supply curve is derived for the catchment from where water may be acquired from irrigators for environmental flows.     

Integrated assessment of cropping patterns under different policy scenarios in Quzhou County,North China Plain

Agricultural land use is affected by government policies and leads to different consequences of regional sustainability. In this work, changes in cropping patterns including acreage, cropping locations and management-related environmental impacts were simulated under various policy scenarios for Quzhou County, China. This county is in China's major agricultural region, the North China Plain. Four dominant crop systems were categorized (winter wheat/summer maize, winter wheat/summer maize/spring maize, cotton, and vegetables) and analyzed, following two alternative policy scenarios that either prioritized government funding to subsidize crop production (“subsidy” scenario) or promoted advanced irrigation techniques (“technique” scenario). Input–output coefficients for all four crop systems were determined, mainly irrigation demand, yield, and price of produce, but other factors like a limited area of arable land and scarce regional water resources were also considered. For the simulation, a LINDO Inc. system was linked with the CLUE (Conversion of Land Use and its Effects) model. Temporal changes of crop systems were simulated with the LINDO system, whereas spatial dynamics of cropping patterns were simulated with the CLUE model, based on land suitability maps. The results show that crop patterns changed variably with time under the two scenarios, and water availability was the primary constraint on sustainability of land use. Under the subsidy scenario, winter wheat/summer maize/spring maize became dominant across the entire county, replacing other crop systems. In contrast, the vegetable system gradually occupied farmland surrounding the township under the technique scenario. The different policies produced opposite consequences for regional sustainability. Although a “subsidy” policy contributed to farmers’ income, it did not encourage water conservation for sustainable crop production, leading to land abandonment because of water shortage. In contrast, the “technique” policy partially cut direct financial benefits to farmers, but promoted water conservation and made a substantial contribution to agricultural sustainability.     

Nonfarm employment,agricultural intensification,and productivity change: empirical findings from Uganda

This article uses panel data from the Living Standards Measurement Study‐Integrated Surveys on Agriculture for Uganda to assess the farm‐level effects of nonfarm employment on agricultural intensification and productivity change. A sample selection model is used to account for both unobserved heterogeneity and potential simultaneity between agricultural production and nonfarm income. Results show that nonfarm employment can have differential impacts on farm technology intensity and productivity. Nonfarm income is found to have a positive impact on farm hired labor and improved seed intensity; a negative effect on on‐farm family labor use; and no significant impact on fertilizer, soil water management, and joint use of farm technologies. The econometric evidence also indicates that agricultural productivity declines as nonfarm income increases. Taken together, our findings reveal important trade‐offs between nonfarm employment and income and farm productivity growth under smallholder agriculture. The results indicated that targeted policies are required to reduce these potential trade‐offs between nonfarm employment and agricultural intensification and productivity change.     

Controlling nitrate pollution: An integrated approach

The introduction of the EU Water Framework Directive requires policy to address non-point source pollution as part of an overall integrated strategy to improve the ecological status of water bodies. In this paper, we combine an economic optimisation framework with a dynamic simulation model of N transport in the Kennet Catchment to link decisions taken at the farm level to reductions in nitrate concentrations in the River Kennet. We examine a variety of policies targeted at reducing fertiliser use and changing the way in which farm land is used. We find that a tax on nitrogen emerges as the best policy both in terms of cost- and environmental effectiveness. Such a policy involves a considerable reduction in fertiliser use, as well as, a restructuring of land-use away from arable towards increased use of set-aside. Budgetary implications of such a radical move towards set-aside would be huge and hence unlikely to be politically palatable given the objective of reducing the EU budgetary allocation to agriculture. Additionally, the current rise in world demand for food may also mitigate calls for increasing the proportion of land taken out of agricultural production. Although the study succeeds in establishing a link between actions on the farm and nitrate concentrations in the stream water, further work is required to explore the effect of the retention of nitrates in the unsaturated zone and groundwater on this link.     

The Effects of a Federal Flat Tax on Agriculture

This study examines the impact of a federal flat tax on agriculture by determining the tax liability under the current and flat tax systems using actual farm records. The study considers the linkages between agriculture and the rest of the economy by examining the impact of a flat tax on interest rates and capital investment and how those changes would affect agriculture. Results indicate that roughly 63% of agricultural producers would benefit from a flat tax in terms of lowering taxes paid. Under the flat tax, larger farms and more profitable farms would be relatively better off.     

Taxes and Subsidies in Vertically Related Markets

In the framework of a two–country, two–good partial equilibrium model where one of the commodities (the bulk commodity) is an intermediate input in the production of the second good (the processed good), we assume that the government wishes to transfer income to both bulk commodity and processed good producers. Our analysis is concerned with efficient redistribution. The instruments are subsidies or taxes, and there is an opportunity cost of public funds. We use the targeting principle to characterize the set of optimal subsidies or taxes applied on both the bulk commodity and the final good in this vertically related market structure. The theoretical analysis is illustrated using the example of cereals (the bulk commodity) and pork and poultry (the processed good) in the European Union.