Linda Calvin

Distributional Welfare Implications of an Irrigation Water Subsidy

The distributional welfare implications of a subsidy for irrigation water for California rice producers are analyzed. A more general equilibrium approach than that used in previous studies is taken in order to determine the effects of subsidy on consumers, subsidized producers, and unsubsidized producers. The two important policy conclusions of the results are that unsubsidized producers bear part of the cost of a subsidy through lower prices, and that consumers (taxpayers) may gain by sponsoring increased production through a selective subsidy.

Response to a Food Safety Problem in Produce

Imports play an increasingly important role in produce consumption in the United States. In 1996, imports accounted for 38 percent of fresh fruit consumption and 14 percent of fresh vegetable consumption (Lucier, Pollack, and Perez 1997). Although infrequent, food contamination problems, traced to both domestic and imported produce, have raised consumer concerns about food safety generally and about the sources of fresh produce specifically (Tauxe 1997). Although researchers have not found clear evidence that imported produce poses more health risks than domestic produce (Zepp, Kuchler, and Lucier 1998), a small number of well-publicized incidents of contamination implicating foreign producers has increased consumer awareness of the possible role imports might have in food safety problems. In the global economy for fresh produce, a food safety problem in an exporting country has important effects on producers and consumers in the importing country and on producers in other countries competing in the same market.

The changing role of consumers and suppliers in a food safety event: the 2006 foodborne illness outbreak linked to spinach

ABSTRACT This article provides a means for testing whether buyers or sellers are responsible for a drop in sales following a market shock. We show that suppliers’ responses dominated the market reaction to the 2006 US Food and Drug Administration warning to avoid fresh spinach contaminated with potentially deadly bacteria Escherichia coli O157:H7. A modified Durbin-Wu-Hausman test for temporary price endogeneity is developed and used in a leafy green vegetable demand model. Test results indicate the price of bagged spinach was exogenous before the announcement but endogenous for approximately 12 weeks afterward. We show these results are consistent with the notion that suppliers temporarily limited the availability of spinach to consumers. Instead of consumers choosing the quantity purchased given exogenous prices, it was suppliers who limited the quantity marketed and consumers’ choices established the market price.