Contrasting Quantitative and Qualitative Approaches to Rural Development Analysis: The Case of Agricultural Intensification in Lebanon

While peripheral rural regions in Lebanon face typical problems of lagging development and economic marginalisation, they have not been regarded as a priority for policy‐makers. Local extensionists have encouraged technological innovation as a means of improving farmers’ livelihoods, and this has led to increasing input use and an intensification of agricultural production. This paper applies contrasting quantitative and qualitative methodologies to analyse the effects of such changes at the level of the overall economy of Lebanon and also to explore the impacts on rural households. A computable general equilibrium (CGE) model simulates shocks in which agricultural output increases due to different types of intensification. The results are contrasted at local level through the use of qualitative case study analysis carried out in the Hermel district of northeast Lebanon. Quantitative simulations indicate that, while agricultural intensification has a positive effect overall on the Lebanese economy, the effects on rural households and the income of farmers are negative. The case‐study interviews demonstrate that, at local level, agricultural trade liberalisation, increased agricultural output and greater volatility of commodity prices have resulted in farmers opting for lower input use and more secure market forms of production.     

Evaluating spatial and temporal variation in agricultural output elasticities in Turkey

This study evaluates spatial variation in the relationship between agricultural output and input use across Turkey. The potential impact of the national agricultural policy reform introduced in 2001 on the spatial variation in agricultural output elasticities across the country was explored. By applying a spatial production function to the province‐level data in 2000 and 2007, spatial heterogeneity in the variance of provincial total factor productivity and the input factor‐output elasticities was identified across the country. Results show that the disparities in agricultural activities and geographic conditions affected return from input factors. Empirical findings from a spatial spillover model also suggest that changes in the input factor‐output elasticities varied significantly across Turkey between 2000 and 2007, after the policy reform. Results suggest that future policy reform that recognizes regional comparative advantage through understanding the geographic heterogeneity of the agricultural sector is important for enhancing Turkey's agricultural output.     

The impact of the 1999 CAP reforms on the efficiency of the COP sector in Spain

The cereal, oilseeds, and protein crop sector (COP) occupies a prominent position within the European Union's agricultural sector. Within Spain, the COP sector accounts for almost a third of total Agricultural Guidance and Guarantee Fund expenses, and half of the utilized agricultural area (UAA). The COP sector is not only relevant because of its physical and economic magnitude, but also because of the political attention it receives. The Common Agricultural Policy (CAP) reforms that occurred during the 1990s paid special attention to this sector. This article aims to determine the impacts of Agenda 2000 on a sample of Spanish COP farmers' production decisions by using an output-oriented stochastic distance function. The distance function allows for an assessment of the reform-motivated changes on total output, input used, input composition, and crop mix. It also permits an assessment of the impacts of the reform on farms' technical efficiency.
Results show that the reform has shifted the production frontier inward and changed output composition in favor of voluntary set-aside land. With respect to input composition, Agenda 2000 induced a decrease in land, fertilizers, pesticides, and other inputs in favor of labor. In addition, Agenda 2000 has had a negative impact on technical efficiency.     

Broad‐based Agricultural Development versus Food Self‐sufficiency: A General Equilibrium Analysis in India

Intersectoral linkages are analysed using a CGE model based on a SAM constructed from Indian national accounts data for 1988–89. The model includes the rural non‐farm sector, public sector production and aspects of public policy. Evidence supports the arguments of Chakravarty (1987) and Ahluwalia (1986) regarding the importance of broad‐based agricultural development as opposed to increased production in the food sector alone aimed at achieving food self‐sufficiency.     

Is the agricultural industry spared from the influence of the Australian carbon tax?

The Australian agricultural sector provides food security for the nation and affects the livelihood of farmers and the development of rural communities. This sector has been uneasy about the Australian carbon tax scheme introduced in July 2012 although the government has exempted the agricultural sector from the scheme. By employing a computable general equilibrium model and an environmentally extended Social Accounting Matrix, this article simulates the effects of different carbon tax policy scenarios. The modeling results show that all agricultural sectors will be affected negatively but to differing degrees. The household compensation policy will improve the performance of the poultry and fishing sectors, while having opposite effects in the other agricultural sectors. The inclusion of the agricultural industry into the carbon tax scheme will lead to a considerable further decrease in output, employment and profitability in the agricultural sector, and a significant further reduction in real GDP, but a much larger emission reduction.     

The effect of barge and ocean freight price volatility in international grain markets

Short‐run responses of export and domestic shares of total agricultural output to changes in stocks of domestic savings (SAV), development assistance (ODA), private foreign commercial capital (PFX) and other variables is investigated. A profit function approach is used. Time series data for 19 sub‐Saharan African countries are pooled into three panels using similarities in changes in economic policy regime. Statistical evidence suggests that for the panel of countries that were undertaking liberalized economic reforms, the slope coefficients of some of the variables in the models have changed significantly between 1970–1980 and 1981–1993. For the 1981–1993 period, the impacts of ODA, PFX and SAV on export and domestic shares were different for this panel. The effect of increases in agricultural labor was different across the three panels. There is also evidence that productivity growth in the export agriculture sub‐sector is negative in all the groups. It is recommended that to halt the decline in export share of agricultural output in the group of countries that have undertaken substantial improvements in economic policy environment, efforts must be made to reduce the negative impact of domestic savings and agricultural labor, while at the same time working to reduce the bias of development assistance against food security.     

Evidence of climate change impacts on crop comparative advantage and land use

Relative agricultural productivity shocks emerging from climate change will alter regional cropland use. Land allocations are sensitive to crop profits that in turn depend on yield effects induced by changes in climate and technology. We develop and apply an integrated framework to assess the impact of climate change on agricultural productivity and land use for the U.S. Northern Great Plains. Crop-specific yield–weather models reveal crop comparative advantage due to differential yield impacts of weather across the region's major crops, that is, alfalfa, wheat, soybeans, and maize. We define crop profits as a function of the weather-driven yields, which are then used to model land use allocation decisions. This ultimately allows us to simulate the impact of climate change under the RCP4.5 emissions scenario on land allocated to the region's major crops as well as to grass/pasture. Upon removing the trends effects in yields, climate change is projected to lower yields by 33–64% over 2031–2055 relative to 1981–2005, with soybean being the least and alfalfa the most affected crops. Yield projections applied to the land use model at present-day input costs and output prices reveals that Dakotas’ grass acreage will increase by up to 23%, displacing croplands. Wheat acreage is expected to increase by up to 54% in select southeastern counties of North Dakota and South Dakota, where maize/soy acreage had increased by up to 58% during 1995–2016.     

Measuring agricultural total factor productivity in China: pattern and drivers over the period of 1978‐2016

The Chinese agricultural sector has experienced a substantial increase in total output since dramatic reforms were introduced in 1978. This paper uses the index method to measure agricultural total factor productivity (TFP) for China’s crop and livestock industries, based on the gross output model from 1978 to 2016. We construct production accounts for the industries using input‐output relationships for the 26 main agricultural commodities and commodity groups, which account for over 90 per cent of the total agricultural inputs and outputs. The results show that China’s agricultural TFP grew at a rate of approximately 2.4 per cent a year before 2009, which is comparable to the main OECD countries and is double the world average. TFP growth accounts for approximately 40 per cent of output growth, suggesting that input growth was the main driver of output growth in the past. However, average productivity growth slowed down after 2009 though it has gradually recovered since 2012. The slowdown reflects the emerging challenges to existing farm production practices in Chinese agriculture, suggesting the need for further institutional reform.     

Fertilizer subsidies and food self‐sufficiency in Indonesia

Indonesia is a net importer of almost all of its staple foods. National self‐sufficiency in food, especially the main staple, rice, is a core objective of economic policy. Poverty reduction is also a core policy objective. Since the 1970s, Indonesia has used agricultural input subsidies, especially on fertilizer, to stimulate agricultural production, largely in pursuit of the goal of rice self‐sufficiency. More recently, it has also used output protection, especially in rice, for the same purpose. This article utilizes a multisectoral, multihousehold general equilibrium model of the Indonesian economy to study the trade‐offs between the goals of self‐sufficiency and poverty reduction when two alternative means are used to achieve them: a fertilizer subsidy, on the one hand, and output protection, on the other. It does this by analyzing the aggregate and distributional effects of these two sets of policies and by comparing their effects with nonintervention. The analysis shows that, in terms of its effects on poverty, a fertilizer subsidy can be a more effective instrument for achieving the goal of rice self‐sufficiency than final product import restrictions.     

Dynamic general equilibrium analysis of improved weed management in Australia's winter cropping systems*

A recent analysis indicated that the direct financial cost of weeds to Australia's winter grain sector was approximately $A1.2bn in 1998–1999. Costs of this magnitude represent a large recurring productivity loss in an agricultural sector that is sufficient to impact significantly on regional economies. Using a multi‐regional dynamic computable general equilibrium model, we simulate the general equilibrium effects of a hypothetical successful campaign to reduce the economic costs of weeds. We assume that an additional $50m of R&D spread over five years is targeted at reducing the additional costs and reduced yields arising from weeds in various broadacre crops. Following this R&D effort, one‐tenth of the losses arising from weeds is temporarily eliminated, with a diminishing benefit in succeeding years. At the national level, there is a welfare increase of $700m in discounted net present value terms. The regions with relatively high concentrations of winter crops experience small temporary macroeconomic gains.     

The impact of commodity price shocks among regional economies of a developing country

Volatile commodity prices have become commonplace in the world economy. Although is widely accepted that commodity‐rich countries are affected by this phenomenon, information about how commodity price shocks impacts their regional economies is scarce. This work analyses how shocks in copper prices impact the economies of the major copper‐producing regions in a developing country, such as Chile. To achieve this goal, a two‐step method is implemented. First, we estimate long‐term copper prices using the Wets and Rios approach (2015) and these estimates are then contrasted with those forecast by the Chilean public advisory committee. Second, a general equilibrium model is implemented to simulate the effects of both expansive and restrictive copper price cycles within major producing regions in Chile. Our results show that the proposed approach yields more homogeneous price projections than those made by the Chilean Government, which, in turn, are very close to variations in response to negative shocks. The price simulations confirm that price cycles affect the savings of government and business, which directly dampens regional production, mainly via investment, capital mobilisation and diversification of production. Because of this, fiscal revenues generated by copper sales act as a trade cycle term multiplier in regional economies. Overall, within copper‐producing regions, we suggest implementing long‐term policies to improve profit distribution efficiency.     

A review of recent developments and applications of partial equilibrium models of the forest sector

Recent history has seen an increase in the utilization of partial equilibrium based forest sector models to identify potential impacts of various policies or timber market shocks. These models are particularly useful in that they employ economic theory to capture the interaction of supply and demand in a framework where commodity prices are endogenous to the policy or shock simulated. We present recent developments and linkages between models and review applications of these models to forest policy questions over the previous decade. We conclude with a discussion of potential future directions for such research.     

Modelling agricultural land use allocation in regional Australia

An analysis of the drivers of agricultural land use is important for policy makers as the issues of climate change and food security become increasingly prominent in the political landscape. This paper analyses the role of prices, total land holdings and climate on land use in Australia. The analysis relates to a unique comprehensive coverage of commodity types at a regional level. An explicit treatment of missing data and the novel use of cluster analysis is employed within a partial adjustment framework for modelling land allocation. The majority of commodity types across regions exhibit significant degrees of slow partial adjustment for land allocation, the frequency of slow adjustment is greatest with crops and livestock and weakest for vegetables. In general, relative own and cross prices, total land holdings and rainfall only have a minor impact on short‐term land allocations, however numerous individual commodity/regional combinations have identified significant short‐run impacts.     

Drivers of food price in China: A heterogeneous panel SVAR approach

In this paper, we examine the effects of shocks in agricultural output, production material price and production price on China's food price using panel data of 26 provinces for the period 2004 Q1–2015 Q4. Employing a heterogeneous panel structural vector autoregressive (SVAR) model, we identify the causal flows between the endogenous variables via directed acyclic graphs method. The empirical results from impulse response functions and variance decompositions suggest sizeable cross‐province variations. The main driving force of food price is the price inertia shock, rather than the agricultural output or the vertical chain of price transmission shocks. The findings support the view that price expectation is the key shifter of food price. Moreover, the shocks in the vertical chain of price transmission are only weakly linked to food price. Our findings are robust to an alternative panel SVAR model identified via Cholesky decomposition.     

Dual Technological Development in Botswana Agriculture: A Stochastic Input Distance Function Approach

To improve the welfare of the rural poor and keep them in the countryside, the government of Botswana has been spending 40% of the value of agricultural GDP on agricultural support services. But can investment make smallholder agriculture prosperous in such adverse conditions? This paper derives an answer by applying a two‐output six‐input stochastic translog distance function, with inefficiency effects and biased technical change to panel data for the 18 districts and the commercial agricultural sector, from 1979 to 1996. This model demonstrates that herds are the most important input, followed by draft power, land and seeds. Multilateral indices for technical change, technical efficiency and total factor productivity (TFP) show that the technology level of the commercial agricultural sector is more than six times that of traditional agriculture and that the gap has been increasing, due to technological regression in traditional agriculture and modest progress in commercial agriculture. Since the levels of efficiency are similar, the same pattern is repeated by the TFP indices. This result highlights the policy dilemma of the trade‐off between efficiency and equity objectives.     

Linkages between the farm and nonfarm sectors at the household level in rural Ghana: a consistent stochastic distance function approach

This article explores the effects within households of an expanding rural nonfarm (RNF) sector in Ghana. We ask whether the growing RNF sector allows for economies of diversification within farms, how it affects household input demands, and whether it has measurable effects in overall household production efficiency. We explore the intrahousehold linkages between agricultural and RNF activities, first assuming perfectly competitive input and output markets and then with market failures, in particular missing labor and credit markets. We then measure these linkages using a household level input distance function, finding high levels of inefficiency in Ghanaian farms. Also, there are cost-complementarities between the RNF sector and the agricultural sector, particularly with food crops in which the poorest tend to specialize. The expansion of the RNF sector increases demand for most inputs including agricultural land. Finally, we show that smaller farms tend to be more efficient, and that RNF output is helping the farm household to become more efficient, but the latter result is not robust.     

An interdisciplinary approach to regional land use analysis using GIS, with applications to the Atlantic Zone of Costa Rica

Policy makers and other stakeholders concerned with regional rural development increasingly face the need for instruments that can improve transparency in the policy debate and that enhance understanding of opportunities for and limitations to development. To this end, a methodology called SOLUS (Sustainable Options for Land Use) was developed by an interdisciplinary team of scientists over a 10-year period in the Atlantic Zone of Costa Rica. The main tools of SOLUS include a linear programming (LP) model, two expert systems that define technical coefficients for a large number of production activities, and a geographic information system (GIS). A five-step procedure was developed for GIS to spatially reference biophysical and economic parameters, to create input for the expert systems and the LP model, to store and spatially reference model output data, and to create maps of both model input and output data. SOLUS can be used to evaluate the potential effects of alternative policies and incentive structures on the performance of the agricultural sector. A number of practical applications demonstrate SOLUS's capability to quantify trade-offs between economic objectives (income, employment) and environmental sustainability (soil nutrient balances, pesticide use, greenhouse gas emissions). GIS-created maps visualize the spatial aspects of such trade-offs and indicate hotspots where local goals may conflict with regional goals.     

Economic valuation of climate‐change‐induced vinery landscape impacts on tourism flows in Tuscany

It is widely acknowledged that landscape features can play a major role in determining tourism demand. The present article assesses the impact of vinery landscape and high‐quality wine production on regional tourism flows in Tuscany, an important tourist region in Italy and renowned for its enchanting countryside. Thus, vinery landscape and high‐quality wine production have been included as explanatory variables in our model for tourism flows. This model has been estimated for both international and domestic markets for the whole region of Tuscany. Estimation results confirm that land areas devoted to the production of these superb Tuscan wines, in the particular case of Siena including the Brunello di Montalcino, play an important role in explaining international tourism flows. In this context, we estimate climate‐change‐induced impacts on vinery landscape and quality wines in the tourism sector. These are estimated to cause a loss in the tourism revenues of nearly 15 and 20 million Euros a year, respectively, for 2020 and 2050, for the Tuscany region. Such losses are quite significant, and reiterate the urgency to identify and implement adequate policy options so as to moderate such land use changes, and respective negative welfare impacts.     

Setting Climate Action as the Priority for the Common Agricultural Policy: A Simulation Experiment

We quantitatively assess the impacts of re-allocating budgetary resources within Pillar 1 of the EU's Common Agricultural Policy (CAP) from direct income support to a direct greenhouse gas (GHG) reduction subsidy for EU farmers. The analysis is motivated by the discussion on the future CAP, with calls for both an increased ambition on climate action from the agricultural sector and for a more incentive-based delivery system of direct payments under strict budgetary restrictions. By conducting a simulation experiment with an agricultural partial equilibrium model (CAPRI), we are able to factor in farmers’ supply and technology-adjusting responses to the policy change and to estimate the potential uptake of the GHG-reduction subsidy in EU regions. We find that a budget-neutral re-allocation of financial resources towards subsidised emission savings can reduce EU agricultural non-CO₂ emissions by 21% by 2030, compared to a business-as-usual baseline. Two-thirds of the emission savings are due to changes in production levels and composition, implying that a significant part of the achieved GHG reduction is offset globally by emission leakage. At the aggregated level, the emission-saving subsidy and increased producer prices compensate farmers for the foregone direct income support, but differences in regional impacts indicate accelerated structural change and heterogeneous income effects in the farm population. We conclude that the assumed regional budget-neutrality condition introduces inefficiencies in the incentive system, and the full potential of the EU farming sector for GHG emissions reduction is not reached, leaving ample room for the design of more efficient agricultural policies for climate action.     

INPUT-OUTPUT FORECASTING OF REGIONAL AGRICULTURAL POLICY IMPACTS

Input-output coefficients and multipliers based upon them are increasingly being used to evaluate the impact of changes in agricultural policies, yet there are a number of specific difficulties with regard to their use in this context. This paper articulates various criticisms which can be made, and tests their validity by comparing multiplier forecasts with out-turns from a series of eight input-output tables describing the Welsh agricultural sector. The predictive performance deteriorates rapidly as the time between base matrix and forecast year increases; more attention needs to be paid to the forecasting of final demand, spill-over effects into other sectors, and the functional relationship between labour input and gross output.