Gerald Shively

Spatial integration, transport costs, and the response of local prices to policy changes in Ghana

The purpose of this paper is to investigate the respective roles of spatial integration and transport costs in explaining price changes in Ghana. A fundamental question that remains unanswered in most countries undergoing economic reform is to what extent local markets respond to structural and macroeconomic policy changes. The objective of this paper is to explore this question theoretically and empirically, and to assess the respective roles of spatial integration and transport costs in explaining price changes following economic reforms in Ghana.

Agricultural Change, Rural Labor Markets, and Forest Clearing: An Illustrative Case from the Philippines

This paper studies the links between agricultural employment and upland activities at a tropical forest margin. A model of lowland agricultural production is combined with a model of labor allocation on a representative upland farm to show how labor productivity, agricultural wages, and the returns from upland activities determine rates of forest clearing. Farm level data from the Philippines demonstrate how agricultural intensification––in the form of lowland irrigation development––led to an increase in labor demand, an increase in employment of upland inhabitants, and small but statistically significant reductions in rates of forest clearing. (JEL Q15, Q23)

Agricultural intensification, local labor markets, and deforestation in the Philippines

This paper examines agricultural intensification and its impact on deforestation in a frontier region of the Philippines. Panel data covering the period 1994–2000 are used to study labor demand and resource reallocation in response to lowland irrigation development. Results illustrate how irrigation has led to changes in employment, incomes, and activities at the forest margin. Findings indicate that the off-farm employment opportunities created by irrigation development have helped to reduce rates of forest clearing. Although some initial employment gains have been reversed, wage-induced increases in agricultural productivity in the uplands have reduced forest pressure. Results show that lowland irrigation has had direct, indirect, and lagged effects on rates of forest clearing, and that a virtuous cycle may be at play, with irrigation leading to both poverty reduction and reduced forest pressure.

Consumption risk, farm characteristics, and soil conservation adoption among low-income farmers in the Philippines

This paper investigates patterns of soil conservation adoption among low-income farmers in the Philippines. A model is presented that focuses attention on the role of assets and consumption risk in influencing soil conservation adoption decisions. Results from a reduced-form probit model of adoption are reported. These econometric findings indicate that patterns of soil conservation adoption reflect relative risk considerations in addition to farm and household characteristics. Farm size, tenure security, labor availability, and land quality all exhibit a positive association with soil conservation adoption. In contrast, controlling on these and other household characteristics, the probability of adoption falls as consumption risk rises. These results underscore a need for greater sensitivity among policymakers to the role of consumption risk in influencing soil conservation decisions in low-income settings.

Poverty, consumption risk, and soil conservation ☆

Abstract This paper studies the impact of poverty and uninsured consumption risk on incentives to invest in soil conservation. A stochastic dynamic model is used to show how consumption risks and costs of investment influence incentives to adopt soil conservation measures on low-income farms. The model is calibrated using production data from hillside farms in the Philippines. Simulations with the model demonstrate how the value of soil conservation depends on the cost of investing, the risk characteristics of the soil conservation method and differences among households in capacity to bear risk. Model predictions are compared with empirical adoption patterns, as described by a probit model and nonparametric kernel regressions of adoption probability. Empirical findings show how differences in farm size, tenure security, risk exposure, and access to credit help to explain patterns of soil conservation adoption. Implications for policy are discussed.

Development policies, resource constraints, and agricultural expansion on the Philippine land frontier

This paper examines ways in which development policies interact and influence incentives for agricultural expansion in frontier areas. We develop a model of household response to economic and technical stimuli, conditional on agronomic and household characteristics. We evaluate the model empirically using survey data gathered from low-income corn and vegetable farms near a national park in the southern Philippines. We find that within farms, land allocation is responsive to relative crop prices and yields. However, different crops elicit different responses. In particular, some crop expansion takes place primarily through land substitution and intensified input use, while changes in prices or yields of other crops induce an expansion of total farm area. Land and family labor constraint bind at different points for different crops. These results suggest that because multiple policies interact, environmental policies must have multiple strands in order to replace incentives to further land expansion.JEL codes: Q12, Q24, O13.

Food Price Variability and Economic Reform: An ARCH Approach for Ghana

Changes in maize price levels and variability in Ghana are investigated. A model of wholesale price determination is reviewed in which grain stocks are held for speculative storage as well as export to neighboring countries in the Sahel. To test the model, an Autoregressive Conditionally Heteroskedastic (ARCH) regression is applied to monthly maize data for two markets over the period 1978–93. The regression is used to measure changes in maize price volatility in Ghana, and to infer the importance of past prices, domestic and regional production, and commodity storage and trade in explaining these changes. Copyright 1996, Oxford University Press.

Economic reform and food prices: Evidence from markets in Ghana

Abstract This paper investigates trends in food prices in Ghana during 1970–1993. Regression results confirm that real wholesale prices of food have been declining since the 1970s. Price trends in the 1980s are characterized by a downward shift at the beginning of the postreform period and a subsequent continuing downward trend. Despite falling grain prices, we find that agricultural wage rates failed to provide an adequate basis for subsistence, particularly during periods of large seasonal price rises. Many farmers hold grain for both speculation and to smooth income. This view is supported by evidence regarding seasonal price spreads that have been increasing since 1984. We find no support, however, for conclusions of trader manipulation of marketing margins during the adjustment period.

Risks and returns from soil conservation: evidence from low-income farms in the Philippines

This paper examines risks and returns associated with soil conservation on hillside farms in the Philippines. Stochastic efficiency analysis is combined with a heteroskedastic regression model to assess the impacts of contour hedgerows on lowincome corn farms. Regression analysis indicates that, over time, contour hedgerows can improve yields up to 15% compared with conventional practices. The analysis also provides weak support for a hypothesis that hedgerows are variance reducing. However, results show that the reduction in yield variability afforded by hedgerows is modest, and that yield variability may increase by as much as 5% as hedgerow intensity rises. Tests for stochastic dominance show that, compared with the conventional tillage system, hedgerows do not constitute an unambiguously dominant production strategy. Stochastic efficiency with respect to a function is used to identify a range for the coefficient of relative risk aversion within which hedgerows dominate conventional tillage. Results suggest this range would be rather high; hedgerows dominate the conventional cropping strategy only for decision-makers with relative risk aversion coefficients in the range 3-5.5. Implications for soil conservation adoption in low-income settings are discussed.

Activity Choice, Labor Allocation, and Forest Use in Malawi

This article examines the determinants of activity choice affecting forest use among low-income households in Malawi. Data from three villages are used to estimate a system of household labor share equations for maize production, forest employment, and non-forest employment. A system estimation approach is used to identify factors influencing the competing and synergistic livelihood strategies which households undertake at the forest margin. Results from constrained maximum likelihood estimation indicate heightened incentives to degrade forests when returns to forest use are high. Factors reducing forest pressure include favorable returns to non-forest employment, secondary education of the household head, and wealth. (JEL J22, Q12)