Structural changes in U.S. agriculture: Implications for African American farmers

Structural changes in U.S. agriculture, influenced by technological and institutional forces, have altered the economic and social characteristics of rural America, especially that segment of rural America populated by farmers and their families. Changes in the structure of agriculture have greater implications for small scale farmers, many of whom are African American, in that strategic options for their farm-firms are constrained to: increasing their farm size, exiting farming, and obtaining off-farm employment to survive. This article presents a rationale for public support of limited resource farmers, identifies structural trends in U.S. agriculture and their impacts on African American farmers, discusses economic problems unique to these farmers, and recommends needs for specific public policies and development programs.     

Savings,pension rights and taxation

Summary The voluntary saving rate has declined in The Netherlands over the last thirty years. In this paper the increasing share of transfer income in total income, with a high propensity to consume, and the increase in collective pension schemes are simultaneously used to explain this development. Furthermore, the influence of taxes is modelled. The planning horizon of the representative consumer is treated as a parameter to be estimated. The planning horizon obtained (about 4.5 years) appears to be short compared to expected residual lifetime, implying rather small interest elasticities. The estimation results indicate that, in case the obligatory pension schemes are diminished, the representative consumer offsets the loss in pension benefits for 75 per cent by voluntary, additional accumulation of nonhuman wealth in the long run. The working of the model is illustrated by simulation experiments.I wish to thank two anonymous referees, Prof. J. Pen, G.M.M. Gelauff, J.J. Graafland, W. Vossers and other colleagues of the CPB for their helpful comments.     

Foreign direct investment in OECD countries: a special focus in the case of Greece

Foreign Direct Investment (FDI) is considered as an important instrument for economic development all over the world. The aim of this paper is to examine the FDI inflows determinants for 24 OECD countries. To this end we employ annual data from 1980 to 2012 for a series of potential FDI determinants that have been identified as the most important by the relevant literature. Our empirical strategy employs both the standard fixed effects panel as well as a dynamic panel approach. The empirical findings highlight the importance of market size, trade openness, unit labor cost, schooling, taxation, gross capital formation, institutional variables, and ROA/ROE as significant FDI determinants. In the case of the dynamic panel model those FDI inflows determinants are not uniform for all country groups. Additionally, the results indicate that corporate tax rates clearly affect FDI attractiveness. This finding is robust when testing different countries subgroups. The present study has important policy implications indicating the factors that host economies should place emphasis on in order to attract FDI inflows. Policy makers should not only pay attention to the corporate tax rate level but they should also design a simple, stable and transparent taxation system that minimizes the relevant business risk.     

Productivity differences in multiple output industries: An empirical application to electricity distribution

Given that electricity distribution is undertaken via a network, it is expected that costs of production are affected both by the nature of the network and the volume of physical output distributed via the network. This two-dimensional concept of firm size, that is involving network size (number of customers) and the level of physical output (kWh), also corresponds to the distinction between productivity measures of returns to density and returns to scale.This approach has been used to specify a restricted multioutput cost function and to estimate this function for the Norwegian electricity distribution industry through the use of a flexible functional form (translog). The results indicate that no economies of scale are present in the industry even for small plants when measured correctly, but that economics of density are present.     

Legalization of drugs: Effects on the workplace

In the last few years bipartisan support for legalizing drugs has grown to a surprising level. Because of the lack of involvement of the business community in this debate, we surveyed the human resource managers of 127 firms about their perceptions of the effects of legalization. Their responses were uniformly negative, with expectations that drug use, absenteeism, worksite crime, and liability costs would increase, while the quality and quantity of work would decline. They also forecast increases in drug testing, performance monitoring, and education and rehabilitation programs as a result.     

Combining “real effort” with induced effort costs: the ball-catching task

We introduce the “ball-catching task”, a novel computerized task, which combines a tangible action (“catching balls”) with induced material cost of effort. The central feature of the ball-catching task is that it allows researchers to manipulate the cost of effort function as well as the production function, which permits quantitative predictions on effort provision. In an experiment with piece-rate incentives we find that the comparative static and the point predictions on effort provision are remarkably accurate. We also present experimental findings from three classic experiments, namely, team production, gift exchange and tournament, using the task. All of the results are closely in line with the stylized facts from experiments using purely induced values. We conclude that the ball-catching task combines the advantages of real effort tasks with the use of induced values, which is useful for theory-testing purposes as well as for applications.     

Trade Liberalization and Environmental Taxation in Federal Systems

The literature on trade liberalization and environment has not yet considered federal structures. In this paper, we show how the design of environmental policy in a federal system has implications for the effects of trade reform. Trade liberalization leads to a decline in pollution taxes, regardless of whether pollution taxes are set at the federal (centralized) or local (decentralized) level, and it increases social welfare. The effect under a decentralized system is smaller than if these taxes are set by the federal government, and pollution emissions therefore decline in this case. Moreover, majority bias interacts with trade liberalization if federal taxes are used.     

Evolutionary Stability in the Investment-Opportunism-Retaliation Game

Can economically efficient outcomes be obtained and sustained in the absence of externally enforced property rights? We study the evolutionary properties of a game that exhibits two well-defined Nash equilibria: one generates an inefficient outcome while the other set generates an efficient outcome supported by the potential for retaliation. Although standard forward-looking refinements eliminate the efficient equilibrium, neither equilibrium type satisfies strict evolutionary stability criteria. However, both types of equilibrium define strategies that are neutrally stable, which makes them vulnerable to drift in dynamic environments. We conduct computer simulation experiments in which players learn adaptively via a tournament selection mechanism called sophisticated experimentation. Our simulations demonstrate that while the system spends a disproportionately high proportion of time in the inefficient equilibrium set, the efficient equilibrium is pervasive as the system drifts back and forth between the equilibrium sets, never settling on one or the other.     

On the transaction values of land use rights in rural China

Land Use Rights (LURs) in China affect farmers’ productivity through investment incentives and the way land is allocated across households. LURs have implication and trade-offs between equity and growth. This paper examines how Chinese farmers might respond if the Chinese government made it legal for farmers to buy or sell LURs. Livelihood choices, labor substitution, market infrastructure, a lack of property right protections, entrepreneurship, bureaucracy, and political will are all influential factors that will determine whether such a program would work. The purpose of this paper is to examine the economics of transaction in LURs, estimate the value at which LURs could transact in equilibrium, and to analyze factors that would affect these price changes. We evaluate farmer’s intention to buy and sell LURs and how much they are willing to pay and receive for LURs.     

Science and politics: The 1981 and 1984 LIHEAP distribution formulas

The Low-Income Home Energy Assistance Program (LIHEAP) is a federal block grant program to help low-income households pay their heating and cooling bills. If the regular fiscal year LIHEAP appropriation is less than or equal to $1.975 billion, then a 1981 formula is applied to distribute funding across states, while if appropriations rise above the $1.975 billion threshold, a 1984 formula is applied in conjunction with two hold-harmless provisions. In 18 of the past 20 years, the 1981 formula has served as the default mechanism to distribute LIHEAP funding. The purpose of this paper is to call attention to the inadequacy of the 1981 formula and to explain why the objectives of LIHEAP are not met when this formula is used. We explain why the distribution of LIHEAP funds is not proportionate to the need for assistance and offer some suggestions for improvement. The 1981 formula is shown to be the outcome of a convoluted political process heavily biased in favor of cold-climate states, with cold-climate states receiving on-the-order of at least $150 million a year in allotment dollars beyond their “fair share” of heating requirements. The 1981 and 1984 distribution formulas are derived and a critical examination of each formula is presented. The 1984 formula is shown to be an ideal mechanism to distribute LIHEAP funds, based on a scientific and rational understanding of low-income energy needs, but legislative constraints prevent its application.