Barry K. Goodwin

Spatial Market Integration in the Presence of Threshold Effects

Threshold cointegration models are used to evaluate spatial price dynamics among regional corn and soybean markets in North Carolina. Thresholds, reflecting the influences of transactions costs, are confirmed and spatial integration is strongly supported. Results indicate that equilibrating adjustments to market shocks are generally complete in two weeks.

Crop Insurance, Moral Hazard, and Agricultural Chemical Use

This study examines the relationship between chemical input use and crop insurance purchase decisions for a sample of Kansas dryland wheat farmers. Recent research by Horowitz and Lichtenberg indicated that, contrary to conventional wisdom, farmers that purchased insurance tended to use relatively more chemical inputs than farmers who did not insure. In contrast, our results confirm the conventional view that moral hazard incentives lead insured farmers to use fewer chemical inputs. Implications for the joint determination of insurance and input use decisions and appropriate estimation techniques are discussed. Copyright 1996, Oxford University Press.

Farm Income Variability and the Supply of Off-Farm Labor

If farmers are risk averse, greater farm income variability should increase off-farm labor supply. This effect is confirmed for a sample of Kansas farmers. Off-farm employment of farmers and their spouses is also found to be significantly influenced by farm experience, off-farm work experience, farm size, leverage, efficiency, and farm-specific education. In addition, farm operators and spouses who receive significant income support through government farm programs are less likely to work off the farm. This may suggest that policy changes reducing farm income support payments may increase off-farm employment of farmers and their spouses. Copyright 1997, Oxford University Press.

Cointegration Tests and Spatial Price Linkages in Regional Cattle Markets

This analysis empirically evaluates spatial linkages in regional cattle markets using cointegration tests of regional price series. Several markets were not cointegrated over the 1980 through 1987 period. However, significant increases in cointegration of several regional livestock markets are observed through the 1980s. The increased cointegration parallels significant structural changes in the livestock industry. A formal analysis of market characteristics reveals that distances between markets, industry concentration ratios, market volumes, and market types have significant influences on cointegration relationships between markets.

An Empirical Analysis of the Demand for Multiple Peril Crop Insurance

Knowledge of factors affecting farmer purchases of crop insurance is essential for evaluating the soundness and profitability of crop insurance programs. Despite this importance, the demand for crop insurance has received limited empirical attention. The present paper reports on an empirical assessment of the demand for crop insurance by Iowa corn producers. Adverse selection in the insured pool suggests that producers with differing levels of loss-risk have different demand elasticities. Loss-risk is included in the empirical analysis and is found to influence the elasticity of demand. Results show average demand elasticities of about −0.32 for relative insured acres and −0.73 for liability per planted acre. Implications for the actuarial soundness of the industry are provided.

What's Wrong with Our Models of Agricultural Land Values?

Following a large literature on the subject, this paper uses farm level data to investigate the capitalization of various agricultural program benefits into land values. We point out that standard empirical modeling strategies may suffer from substantial shortcomings in that they ignore an important errors-in-variables problem. To the extent that realized policy benefits differ from the expected long-run stream of benefits, results may be misleading. We use a large US farm level data set to demonstrate that the implied effects of benefits on land values may vary substantially across years, crops, policies, and regions. Senior authorship is not assigned. Goodwin is Andersons Professor at the Ohio State University, Mishra is an economist with the Economic Research Service of the USDA, and Ortalo-Magné is Jean Monnet Lecturer at the London School of Economics and visiting associate professor at University of Wisconsin. Direct correspondence to Goodwin at 229 AA, 2120 Fyffe Road, The Ohio State University, Columbus, OH 43210, (614) 688-4138, E-mail: goodwin.112@osu.edu. What’s Wrong With Our Models of Agricultural Land Values?

Nonparametric Estimation of Crop Yield Distributions: Implications for Rating Group-Risk Crop Insurance Contracts

We use nonparametric density estimation procedures to evaluate county-level crop yield distributions. Implications for rating area-yield crop insurance contracts are discussed. The procedures developed are used to measure yield risk and calculate insurance premium rates for wheat and barley in the 1995–96 Group Risk Program. Copyright 1998, Oxford University Press.

Price Transmission and Asymmetric Adjustment in the U.S. Beef Sector

The U.S. livestock sector has experienced numerous structural changes in recent years. For example, the meatpacking industry has experienced many mergers and acquisitions leading to significant increases in industry concentration. In particular, the four-firm concentration ratio for steer and heifer slaughter, a frequently cited statistic and an important indicator of industry concentration, increased from 35.7% in 1980 to 79.8% in 1997 (USDA). There have also been significant regional shifts in livestock production and changes in marketing practices, with decreased use of public markets in many areas. For some products, traditional auction markets have been largely replaced by contract production and sales. Cattle inventories have also trended downward over the last two decades. This has been accompanied by decreases in the number of producers and, in some cases, with significant increases in the scale of operations. The vertical transmission of shocks among various levels of the market is an important characteristic describing the overall operation of the market. Of course, price is the primary mechanism by which various levels of the market are linked. The extent of adjustment and speed with which shocks are transmitted among producer, wholesale, and retail market prices is an important factor reflecting the actions of market participants at alternative market levels. The nature, speed, and extent of adjustments to market shocks may also have important implications for marketing margins, spreads, and mark-up pricing practices. An extensive literature has examined mar-

Are “Decoupled” Farm Program Payments Really Decoupled? An Empirical Evaluation

This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program benefits, particularly direct payments, bring about distortions in production. The issue is important in WTO negotiations and in the debate over the distortionary effects of decoupled (“green-box”) payments. Our results suggest that the distortions brought about by AMTA payments, though statistically significant in some cases, are very modest. Larger effects are implied for market loss assistance payments. Probit models suggest that AMTA payments do not influence the likelihood that agents will acquire more land. Our results are reinforced using an aggregate county-level acreage model. Copyright 2006, Oxford University Press.

An Empirical Analysis of Acreage Effects of Participation in the Federal Crop Insurance Program

The extent to which crop insurance programs have resulted in additional land being brought into production has been a topic of considerable debate. We consider multiequation structural models of acreage response, insurance participation, CRP enrollment, and input usage. Our analysis focuses on corn and soybean production in the Corn Belt and wheat and barley production in the Upper Great Plains. Our results confirm that increased participation in insurance programs provokes statistically significant acreage responses in some cases, though the response is very modest in every case. In the most extreme cases, 30% decreases in premiums as a result of increased subsidies provoke acreage increases ranging from 0.2% to 1.1%. A number of policy simulations involving increases in premium subsidies are considered.