Developing Hedging Strategies for Québec Hog Producers under Revenue Insurance

The paper investigates the optimal hedging strategies of Québec hog producers when they participate in a publicly funded revenue insurance program known as ASRA (Régime d'assurance-stabilisation des revenus agricoles). A forecast model of local cash and futures prices is built and Monte Carlo methods are used to derive the optimal futures and option positions of Québec hog producers. The positive correlation between forecasts of futures and cash spot prices induces positive sales of futures and put options to hedge price risk. ASRA provides put options to hog producers at actuarially advantageous terms. Producers can increase the expected utility of profits by selling back a portion of these put options using financial markets. Options are attractive to manage price risk given the nonlinearity in the profit function induced by the revenue insurance scheme. Speculative incentives to use futures and options are also discussed in the context of ASRA.     

A comparison of bias approximations for the two-stage least squares (2SLS) estimator

We consider the bias of the two-stage least squares (2SLS) estimator in linear instrumental variable regression with only one endogenous regressor. By using asymptotic expansion techniques, we approximate the 2SLS coefficient estimation bias under various scenarios regarding the number and strength of instruments.     

Consumer Welfare and the Livestock Economy in the United States

This paper analyzes the responsiveness of the U.S. meal and poultry economy to government policies and other exogenous shocks. In particular, it focuses on the measurement of changes to consumer welfare. An explicit econometric model represents the supply of fed beef, non-fed beef, pork, and poultry. The interaction between the livestock and feed grain markets is captured by an econometric model of the supply and demand for corn. Consumers are represented by a complete system of consumer demand equations. The model is used for a partial analysis of the welfare effects of an actual agricultural policy decision – the sale of large quantities of grains to the Soviet Union in the third quarter of 1972. The loss to consumers that is attributable to the increased grain exports did not reach its maximum until the second quarter of 1975. It is estimated that from 1973 to 1975 consumers suffered a reduction of meat consumption that they valued at $4.5 billion (U.S.). Furthermore, the effects of grain exports proved far larger than the losses due to the poor harvests of 1973 and 1974. Finally, attempts to shelter consumers from the effects of the increased corn exports, either by increased beef imports or increased grain price supports, would have had little success in compensating for the welfare loss actually suffered. Ce papier fail ?analvse de la réponse des secleurs de ?économie quant au bétail et à la volatile aux Flats-Unis, leur reponse à la politique gouvernementale et à?aulres coups exterieurs. En particulier, ce papier se concentre sur la mésure des changements au bien-étre des consommateurs. Un modèle économélrique qui est explicite représente ?approvisionnement du boeuf brouiè, du boeuf non-broutè, du pore el de la volatile. Lcar;action réciproque entre le marché de bélail et ie marché de grains est monlré par un modèle economelrique de ?offre et de la demande pour mats. Un système des équations représente la demande des consommateurs. On utilise le modèle pour ohtenir une analyse parlielle des effeis en ce qui concerne le bien-étre des consommateurs par suite ?une décision faite ?une politique agricole – celle de la vente de grandes quantités de grains à?Union soviétique au troisième quartier de ?année 1972. Laperte aux consommateurs qui est imputable aux exportations augmentées de grain n'apas alteinl son maximum jusqu'au deuxième quartier de 1975. On a eslimé que de 1973 à 1975 les consommateurs ont essuyé une réduction de la consommation de viande qu'ils ont evaluée à$4.5 milliard (en dollars des Etats-Unis). En outre, les effeis des exponations de grain se sont révélés bien grands que les effets des moissons maigres de 1973 el 1974. Finalement, des efforts de protéger les consommateurs contre les effets des exportations augmentees de maìs, ou par des importations augmentees de boeufou par augmenter le soutien pour le prix du grain auraient eu peu de succès à remplacer les pertes en fait essuyées.     

Demand elasticity estimates for New Zealand tourism

Demand elasticities for New Zealand tourism are estimated for 16 different international visitor segments. Segments are differentiated by origin, purpose of visit, and travel style. Elasticities for both international visitor arrivals and on-the-ground expenditure per arrival are estimated for each segment using time-series data. In general, on-the-ground consumption per arrival is more price sensitive than number of arrivals, and Asian market segments are found to be more price sensitive, both in terms of arrivals and on-the-ground expenditure, compared to international visitors from other regions. An application of the results is presented giving the total effect of exchange rate changes on expenditure by international visitors in New Zealand, and management implications are discussed.     

Can a Mixed Health Care System be Desirable on Equity Grounds?*

Should health care provision be public, private, or both? We consider this question in a setting where people differ in their earnings capacity and face some illness risk. We assume that illness reduces an individual's time endowment when waiting for treatment. Treatment can be obtained in a competitive private sector (through private insurance) or in the National Health Service (NHS) where it is provided free of charge but after some (endogenous) waiting time. The equilibrium in the health care sector consists of a waiting time in the NHS such that no patient wants to switch health care provider. This equilibrium is governed by two public policies: the income tax system and the size of the NHS. We find that: (i) a mixed system with a small NHS is never desirable; (ii) actuarially fair sickness insurance is never desirable either; (iii) a mixed system with a sufficiently large NHS may improve on a pure public system if the dispersion of earnings capacities is large enough; and (iv) the welfare gains from such a mixed system are not likely to be significant.