Effects of Market and Regulatory Changes on Livestock Manure Management in Southern Alberta

A spatial model of intensive livestock production for a region in southern Alberta was used to evaluate the impact of economic factors and regulation on regional returns and optimal manure management. Under current conditions, profit maximizing application of manure met nitrogen requirements but phosphorus application was about three times the crop requirements. Higher commercial nitrogen prices did not significantly alter the optimal manure application, but reduced regional returns. With a phosphorus limit regulation, it was less costly to compost about half of the beef cattle manure to remove it from the region than to truck manure long distances to meet the regulation. A $0.91/t reduction in the costs of composting, or a subsidy to reduce costs, was required to meet the phosphorus regulation. The net costs of the subsidy were slightly less than that ofphosphorus regulation. Future research needs to explore the economic market and limitations of composting for manure management before any composting policy is initiated. Nous avons utilisé un modèle spatial de la production animale intensive dans une région du sud de l'Alberta pour évaluer l'impact de la réglementation et de facteurs économiques sur les rendements économiques régionaux et la gestion optimale du fumier. Dans les conditions actuelles, l'épandage de fumier effectué en vue de maximiser les profits a respecté les exigences en azote, tandis que la quantité de phosphore était trois fois supérieure aux besoins des cultures. Le prix élevé de l'azote commercial n'a pas modifié de manière significative l'épandage optimal de fumier, mais a diminué les rendements économiques dans la région. En raison de la réglementation sur le taux d'application limite du phosphore, il a été moins coûteux de composter environ la moitié du fumier de bovins pour l'éliminer de la région que de le transporter par camion sur de longues distances. Pour respecter la réglementation sur le phosphore, il faudrait diminuer le coût du compostage de 0,91 $/tonne ou offrir une subvention équivalente pour diminuer les coûts. Les coûts nets de la subvention étaient légèrement inférieurs à ceux de la réglementation sur le phosphore. Des recherches ultérieures devront être effectuées pour explorer le marchééconomique et les limites du compostage dans le cadre de la gestion du fumier avant d'élaborer toute politique sur le compostage.     

Dynamics of Agricultural Technology Adoption: Age Structure, Reversibility, and Uncertainty

We develop a dynamic model of technology adoption that generalizes previous literature by incorporating technology age, reversible investment, variable inputs and outputs, and stochastic prices. The model is calibrated for irrigated cotton production in California. Optimal investment exhibits a significant vintage capital effect which provides a new candidate explanation for delayed technology diffusion. We show that the hurdle rate derived by option value models can be partially explained by the assumption of irreversible investment, and simulations demonstrate this assumption has regional policy relevance. Uncertainty affects optimal investment but has a declining effect with technology age.     

Effects of Milk Marketing Order Regulation on the Share of Fluid-Grade Milk in the United States

The share of raw milk meeting fluid quality (Grade A) standards in the United States rose steadily through the latter half of the twentieth century, but a shrinking portion of that was used in fluid products. Grade A milk exceeds the quality standards for the manufactured products for which it has been increasingly used. We present an econometric model that exploits regional and temporal variation in policy implementation to identify the effect of marketing orders on the Grade A share of milk. Results support the hypothesis that marketing orders significantly encouraged the growth in the Grade A share of milk.     

Risk Perceptions, Risk Preference, and Acceptance of Risky Food

Consumers' risk preferences are often overlooked in studies of consumer demand for risky food. We find that risk preferences elicited through context-less lottery choices are significantly related to consumers' stated preferences for genetically modified (GM) food. These results suggest risk preferences elicited in the laboratory are not artificial in the sense that they appear to be related to the same risk preferences that govern other individual decisions such as food choice. Consistent with theoretical expectations, risk perceptions and risk preferences were found to be significant determinants of acceptance of GM food, which has important implications for explaining consumer behavior.     

The forward discount puzzle and market efficiency

We argue that the forward discount puzzle is primarily a statistical phenomenon and that statistical rejections of Uncovered Interest Parity do not necessarily constitute valid rejections of market efficiency. We find by using a Taylor expansion a theoretical negative bias in existing regressions of UIP. We propose two alternative tests for market efficiency, one of which is designed to measure the degree of market inefficiency. Our results from these tests indicate that for all four of the bilateral dollar parities studied the foreign exchange market is efficient despite decisive clear rejections of UIP using the conventional regression approach.     

Economics at the FTC: Hospital Mergers,Authorized Generic Drugs,and Consumer Credit Markets

Economists at the Federal Trade Commission pursue the agency’s competition and consumer protection missions. In this year’s essay, in antitrust, we discuss various aspects of our hospital merger analyses as well as the effects of authorized generic drugs on consumers and competition. In consumer protection, we describe two ongoing studies on the use of credit-based insurance scores to price homeowners insurance, and the accuracy of consumers’ credit reports that are provided by credit bureaus.     

Liquidity and asset pricing: Evidence from the Hong Kong stock market

This study investigates the role of liquidity in pricing stock returns in the Hong Kong stock market. Our results show that liquidity is an important factor for pricing returns in Hong Kong after taking well-documented asset pricing factors into consideration. The results are robust to adding portfolio residuals and higher moment factor in the factor models. The results are also robust to seasonality, and conditional-market tests. We also compare alternative factor models and find that the liquidity four-factor model (market excess return, size, book-to-market ratio, and liquidity) is the best model to explain stock returns in the Hong Kong stock market, while the momentum factor is not found to be priced.