Block-Rate versus Uniform Water Pricing in Agriculture: An Empirical Analysis

In this article we adapt Burtless and Hausman's (1978) methodology in order to estimate farmers' demand for irrigation water under increasing block-rate tariffs and empirically assess its effect on aggregate demand and inter-farm allocation efficiency. This methodology overcomes the technical challenges raised by increasing block-rate pricing and accounts for both observed and unobserved technological heterogeneity among farmers. Employing micro panel data documenting irrigation levels and prices in 185 Israeli agricultural communities in the period 1992–1997, we estimate water demand elasticity at −0.3 in the short run (the effect of a price change on demand within a year of implementation) and −0.46 in the long run. We also find that, in accordance with common belief, switching from a single to a block-price regime, yields a 7% reduction in average water use while maintaining the same average price. However, based on our simulations we estimate that the switch to block prices will result in a loss of approximately 1% of agricultural output due to inter-farm allocation inefficiencies.     

Cross-Country Productivity Comparisons: The “Revealed Superiority” Approach

This paper proposes a novel non-parametric methodology for comparing total factor productivity (TFP) across countries and over time. It develops the principle of revealed superiority along the lines of Samuelson's principle of revealed preferences. Specifically, we compare the aggregate actual profits in each country to the hypothetical profits it would have earned if, facing its own prices, it had employed another country's inputs and produced its output. We show that our procedure reveals the true TFP ranking under relatively mild assumptions. We apply our method by ranking a panel of the 25 richest economies relative to one another and over time and find that the United States enjoys the highest TFP whereas Singapore has the lowest.     

Introducing socioeconomic characteristics into production analysis under risk

A theoretical framework is developed to study the effects of socioeconomic factors on farmers' risk attitudes and production decisions. No maintained assumptions about the individual's utility are required. A key element in this framework is the categorization of socioeconomic factors by their effect on the farmer's risk attitudes. A simple methodology for this categorization, based on the equivalence between the Arrow–Pratt measure of risk aversion and the probability of winning demanded, is proposed. The latter is illustrated with data collected in a survey of 180 Israeli farmers from 20 villages.     

Framing the Allais paradox as a daily farm decision problem: tests and explanations

The well-known Allais paradox is reformulated as a daily farm decision problem. Only 26% of the farmers exhibit violations of the expected utility hypothesis. Moreover, the tendency for violation decreases with the farm operator's education, experience and family size. No effects of the farm main crop or its scale were detected. Finally, when taking into account the possibility of choice errors, we find that the violation rate is statistically insignificant.     

Differentiation and Synergies in Rural Tourism: Estimation and Simulation of the Israeli Market

This article applies a discrete-choice equilibrium model with product differentiation to study the rural tourism industry in Israel and to jointly estimate the effect of lodging and farm characteristics on consumer preferences and firms' costs. The model accounts for heterogeneity in tastes and technologies and allows for unobservable product characteristics. We find evidence for technological synergy in the joint production of agricultural goods and rural tourism services, but none in the demand. The differentiation in the industry is the major contributor to the price-cost margin, which averages 62%. An additional minor cause is government regulations, which restrict supply. Simulation results demonstrate the growth potential of the industry and show that the government can play an important role in catalyzing growth via investment subsidization, deregulation of supply and information distribution.     

Labour on the family farm: a theory under uncertainty – an extension

In a framework developed by P.J. Dawson, the effects of output price risk on the family labour supply and its demand for hired labour are investigated. In particular, the effects of changes in autonomous income, expected output price, family composition, and farm size-are studied. Comparative statics is used to sign these effects, revealing the importance of the behavior of the measures of absolute, relative and partial risk aversion in determining them. It is shown that some of the effects may be determined only via empirical research.