Andrew Schmitz

CONSUMER'S SURPLUS, PRICE INSTABILITY, AND CONSUMER WELFARE

This paper evaluates the benefits to consumers from price stabilization in terms of the convexity-concavity properties of the consumers indirect utility function. It is shown that in the case where only a single commodity price is stabilized, the consumers preference for price instability depends upon four parameters: the income elasticity of demand for the commodity, the price elasticity of demand, the share of the budget spent on the commodity, and the coefficient of relative risk aversion. All of these parameters enter in an intuitive way and the analysis includes the conventional consumers surplus approach as a special case. The analysis is extended to consider the benefits of stabilizing an arbitrary number of commodity prices. Finally, some issues related to the choice of numeraire and certainty price in this context are discussed.

The Economics of Pesticide Use and Regulation

Pesticides enhance agricultural productivity, but the environmental and health side effects of their use justify government regulation, a subject of continuing societal debate. Bans on pesticide use are the principal regulatory device used in the United States. The economic impacts of such bans depend on the availability of substitutes, supply and trade conditions, and research and development. Without substitutes, pesticide bans result in reduced production levels and higher prices, a substantial loss of discretionary income to consumers, and a redistribution of income among agricultural producers. Most food safety concerns can be addressed by establishing standards and markets for pesticide-differentiated products, but worker safety and clean water concerns will require direct controls. Pesticide-use fees are shown to be more efficient than outright pesticide bans as a mechanism to obtain environmental goals.

Import Tariffs and Price Formation in the World Wheat Market

A theoretical analysis of price formation in the world wheat market has been presented by McCalla; Taplin; and Alaouze, Watson, and Sturgess. McCalla and Taplin based their models on a duopoly arrangement between the United States and Canada. These models were extended by Alaouze, Watson, and Sturgess to include Australia, and a theoretical model of triopoly pricing in the world wheat market was developed. Canada is assumed to act as a price leader in the triopoly, and it is concluded that producer prices in wheatexporting countries will be higher under triopoly as opposed to duopoly pricing. The major thrust of these papers is that price formation in the world wheat market is largely determined by the major exporters. The purpose of this paper is to suggest and empirically test an alternative hypothesis; namely, that world wheat prices are essentially determined by the major wheat importers. Two major importers-Japan and the European Economic Community (EEC)-are used as the focal point for the analysis. The authors believe the world wheat market is usually a buyers rather than a sellers market. By arguing the market is usually dominated by buyers, it is recognized that there are periodical exceptions to the argument over time, the major one being the commodity boom period of 1973-74. It is well known that the major importers are restricting trade in wheat. This paper suggests that the restrictive policies of the importers (whether consciously or not) are likely to result in a welfare gain to importing nations greater than that under free trade. This suggests that perhaps importing countries are using tariffs in an optimal sense (where all sectors of society are taken into account) rather than merely using them to protect domestic producers from low-priced competitive imports. This is not to argue that a duopoly or triopoly structure does not exist among the United States, Canada, and Australia but rather that the effect of such arrangements is minor relative to the buying power exerted by importers. Although this paper focuses on the world wheat market, the framework of analysis has application to other agricultural markets as well.

Farmland Accumulation and Prices

A model of farmland accumulation is developed to study factors influencing U.S. farmland values. This model stresses the manner in which credit is allocated for land purchases. To secure necessary loans for additional land to expand farm size, the farmer provides as collateral his net accumulated wealth. Thus, land acquisitions are made to increase profits and to provide leverage for further land expansion. Besides income and consumption, the level of accumulated debt is one of the main determinants of farmland prices. Derived demand for farmland is developed, and the pricing equation for farmland is estimated as part of a structural equation model.

International Trade in Intermediate and Final Goods: Some Welfare Implications of Destabilized Prices

I. Introduction, 351. — II. The Massell results, 352.— III. Final product spatial price models, 354. — IV. International welfare, 358. — V. The generalized model, 359. — VI. Price instability in both intermediate and final goods trade, 362. — VII. Summary and conclusions, 364.

Forecasting Daily Hog Prices and Quantities: A Study of Alternative Forecasting Techniques

Abstract Relatively few investigations treat the problem of short-run or daily price and quantity variations. This study concerns forecasting daily hog prices and quantities in selected terminal markets in the U. S. by using various causal and noncausal models. The purpose is to examine the economic and mathematical characteristics of the time series data, and then compare the developed models in terms of their forecasting ability. The performance of each model is evaluated using the Theil coefficient.

Rent Seeking in International Trade: The Great Tomato War

This paper presents a model of international rent-seeking activities by producers in both exporting and importing nations. The model is applied to the winter vegetable trade between the United States and Mexico. An analysis is made of the attempts to form export/import coalitions. Reasons for these failures are given. Due to past failures to impede trade, essentially free trade in winter vegetables between the two countries exists.

Flexible incentives for the adoption of environmental technologies in agriculture.

Acknowledgements. About the Contributors. Preface. 1. Introduction D. Zilberman. Part I: Overview of the Role of Environmental Regulations in Agriculture. 2. Environmental Regulation in Agriculture and the Adoption of Environmental Technology M. Ribaudo, M.F. Caswell. 3. Evolution of EPA Programs and Policies that Impact Agriculture A.C.W. Ogg. 4. Environmental Conservation Strategies: What Works and What Might Work Better S.B. Lovejoy. Part II: Theoretical and Conceptual Framework. 5. Flexible Incentives for Environmental Management in Agriculture: A Typology S.S. Batie, D.E. Ervin. 6. Flexible Incentives: A Unifying Framework for Policy Analysis K. Segerson. 7. Sustainability, Technology and Incentives M. Khanna, et al. Part III: Case Studies. 8. Using Ecolabeling to Encourage the Adoption of Innovative Environmental Technologies in Agriculture E.O. van Ravenswaay, J.R. Blend. 9. Environmental Externalities and International Trade: The Case of Methyl Bromide M.S. Deepak, et al. 10. Alcohol Fuel Tax Policy: Sugar, Corn and the Environment A. Schmitz, L. Polopolus. 11. Public versus Private Land Ownership to Preserve Wildlife Habitat F.M. Roka, M.B. Main. 12. Environmental Policy and Technology Adoption in Animal Agriculture P.E. Norris, A.P. Thurow. 13. Flexible Incentives and Water Quality Control Technologies for the Everglades Agricultural Area D.J. Lee, J.W. Milon. 14. Adoption of Water Conserving Technologies in Agriculture: the Role of Expected Profiles and Public Interest F. Casey, G.D. Lynne. 15. Technological Innovation to Remove Water Pollutants D.D. Parker, M.F. Caswell. 16. Health Risk Information to Reduce Water Pollution S.M. Swinton, et al. 17. Agricultural Production Contracts to Reduce Water Pollution S.M. Swinton, et al. 18. Design versus Performance Standards to Reduce Nitrogen Runoff: Chesapeake Bay Watershed Dairy Farms C.L. Carpentier, D.J. Bosch. Part IV: Political Economy of Environmental Regulation. 19. Takings Issues: The Case of Grass Field-burning Restrictions in Eastern Washington State R. Huffaker, S. Levin. 20. Providing for the Common Good in an Era of Resurgent Individualism A. Randall. 21. Political Feasibility: Institutional Limits on Environmental Regulation W.P. Browne. Part V: Synthesis and Conclusions. 22. From Adoption to Innovation of Environmental Technologies S.M. Swinton, F. Casey. Index.

Boom/Bust Cycles and Ricardian Rent

North American agriculture has been characterized by many as a boom/bust industry. For example, between 1973 and 1983, prairie farmers experienced the most prosperous period of grain farming ever known in western Canada. Had the Golden Age finally arrived for prairie agriculture? Prosperity came to a grinding halt in the mid 1980s, and in the late 1980s prairie grain farmers entered into one of the worst economic situ-

A Polynomial Lag Formulation of Milk Production Response

For much of agricultural production, output response to some given price change is hypothesized to increase first through time and then decline. To detect this type of response, a polynomial price lag model is estimated for milk production. For comparison purposes, a geometrically declining price lag model is also estimated. Although the estimates of long-run supply elasticities do not critically depend on the type of model used, the response for each period of time and for various short-run intervals does.