David G. Raboy

Understanding Challenges to Food Security in Dry Arab Micro-States: Evidence from Qatari Micro-Data

Abstract Using Qatar as a case study, we exploit a novel micro-data set for 102 raw agricultural imported commodities on a shipment-by-shipment basis over the period January 1, 2005 to June 30, 2010. The data comprise over half a million individual observations, with a very rich set of characteristic specifications. Several interesting initial results emerge from the analysis. First, we find evidence of import-price volatility far in excess of world price volatility across a wide spectrum of commodities. Second, supply origins for virtually all commodities are highly concentrated. In many cases, commodities are sole sourced. Third, although less so, concentration is evidenced among Qatari importing companies for certain commodities. Fourth, we notice anomalies that lead to inefficient shipping methodologies and associated increased costs. The paper concludes by providing an empirical illustration of hedonic price modeling for barley followed by guidance for future empirical research.

More Efficient Production Subsidies for Emerging Agriculture in Arab Micro-States: A Conceptual Model

Abstract Import-dependent arid Arab micro-states such as those in the Persian Gulf are particularly vulnerable to food-security risk. Among the many remedial policy suggestions, some initiation or increase in domestic production is to insulate these countries from supply disruption, import price volatility, and high import prices. This article does not address the efficacy of domestic production but notes that such production will require government intervention in the form of production subsidies to mitigate market risk. The narrow focus of this article is to provide a conceptual structure of subsidies that avoids many previous problems in established subsidy systems. The model has two components: a calculation of the true economic cost of a unit of an agricultural product and a deficit payment that is calculated to bridge the gap between true economic cost and market remuneration. The structure of the deficit payment is crucial to the establishment of a beneficial incentive system but the article is limited to a few of many possible options. The deficit-payment option we suggest makes the most use of market signals, avoids perverse incentives, and provides a structure to encourage efficiency, quality enhancement, and product differentiation in agricultural products. The system is designed to be WTO compliant. A detailed numerical example is used for the economic price and simple analytics, and numeric examples are used to illustrate the incentive effects of deficit payments.

The Abuses of Net Present Value in Energy Efficiency Standards

Consumers are often blamed for not making necessary investments in energy-efficient durables despite that these investments have positive net present value (NPV). Several papers have argued that when investments have option-like characteristics (e.g., irreversibility, uncertainty, flexible timing, and lumpiness), the aphorism “invest if the net present value of investing exceeds zero�? isn’t the best advice. Yet, curiously, the Department of Energy (DOE) in the United States proposes new regulations mandating higher energy efficiency standards for consumer durables on the basis of positive NPV over an investment’s lifetime. In this paper, we provide a step-by-step deconstruction of DOE’s NPV methodology and show that DOE’s method purges volatility, volatility persistence, and nonstationarity that are otherwise present in energy prices. As a result, DOE’s projections of future energy prices are artificially smooth and statistically biased, casting serious doubt on the reliability of the magnitude of energy savings from energy-efficient durables. Our results, therefore, support the notion that consumers’ behavior isn’t irrational.

Paternalism and New Durable-Goods Energy Efficiency Standards: Consumers Ain't Misbehavin’

This paper extends the literature on consumer decision-making and energy efficiency through recourse to insights from behavioral economics and neuroeconomics. This approach is motivated by the U.S. Department of Energy’s (DOE) new regulations mandating more stringent energy-efficiency standards for consumer durables, stated to be nested in behavioral economics. Consumers, afflicted by intertemporal internalities, are said to undervalue energy savings from durables “investments,” causing suboptimal energy-efficient-appliance purchasing and, absent government intervention, the irrational foregoing of private returns. This paper critically examines DOE’s regulatory actions. We first analyze consumer heuristic-formation and decision-making regarding durables, inevitably leading to the core issue of decision-making under risk versus ambiguity -- informed by research on the neural correlates to this dichotomy. We then conduct an empirical analysis of retail residential energy prices and determine that these data are unequivocally ambiguous. DOE’s assertion that paternalism will produce private returns drives our subsequent step-by-step deconstruction of DOE’s empirical methodology, yielding the conclusion that it artificially purges volatility and nonstationarity from energy prices. We find no evidence that the DOE regulations will produce private returns to consumers, or that consumer behavior is irrational.

Towards an Initial Crop Portfolio in Food-Insecure Arab Micro-States with Embryonic Agriculture: A Constrained Optimization Approach

Recent periods of high and volatile food prices have prompted several import-dependent Arab micro-states to consider at least some domestic production, among other proposals, as a way of mitigating extremely volatile food prices, which even in rich micro-states can have adverse health and economic effects and probably represent the most serious manifestation of food insecurity to such countries. Using Qatar as a case study, which is almost entirely import-dependent and faces exceptionally volatile food prices, we employ non-linear mathematical programing and analogs to measures of volatility in the financial sector to develop a model to guide the constitution of a crop portfolio for the inaugural year for domestic production, supplemented by storage, which is optimal in the sense of achieving the most dampening effect on price volatility. We conclude that the desired result cannot be achieved for grains through domestic production and that strategic storage must play a crucial role. However, a meaningful target for volatility reduction, well short of self-sufficiency, can be achieved for all other raw products through an obtainable level of domestic production.

Food Security Constrained-Optimization Modeling: Informing Policymakers on Choice Variables

Background: Although the food crisis of 2007/2008 was a global one, arid countries, particularly those in the Arab region, were especially hard hit. Many subsequent policy prescriptions for food security emanated from multilateral organizations, NGOs and the countries themselves. While still proposing more secure ways to source from outside, most proposals stressed greater reliance on domestic production, to shield dry-land countries from external price volatility and the risk of supply termination from exporting countries.The challenges facing arid countries desirous of enhancing domestic food supply are many — lack of water, insufficient arable land, underdeveloped infrastructure and supply-chain mechanisms among many. Yet many arid countries are experimenting with ways to overcome these hurdles and, if successful, will be effectively characterized by emerging, if not embryonic, agricultural sectors.For such countries, given scarce land and water resources that must be considered public goods, some planning function is needed, at least in the initial period of the emergence of what must be considered infant industries. Some form of crop-production allocation will be necessary, but allocation strategy should not be akin to a rigid planned-economy formulation. Market forces and incentives should be employed to the greatest extent possible to motivate crop allocation to a social optimum, given whatever physical, social, political and cultural constraints may exist.

Capital Composition Changes: Effects of Changing Haig-Simons Income Tax Rates

This article investigates changes in capital stock composition that are caused by Abstract changing statutory tax rates in a pure Haig-Simons net income tax. Such a tax system allows the deduction of economic depreciation. An increase in the statutory tax rate results in an increase in the effective tax rate, which in turn leads to a decrease in the demand for capital services and, eventually, a contraction of the capital stock. This contraction results in an increase in the marginal product of capital and the related pretax return to physical capital. Increasing pretax returns impact differently on the user cost of long-lived assets relative to that for short lived assets. At equilibrium, following the tax increase, there will be relatively fewer durable assets. In general, such compositional shifts are optimal responses to a second-best situation; in certain instances, however, such shifts are inefficient.