Marc F. Bellemare

An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia

Do rural households in developing countries make market participation and volume decisions simultaneously or sequentially? This article develops a two-stage econometric method to test between these two competing hypotheses regarding household-level marketing behavior. The first stage models the households choice of whether to be a net buyer, autarkic, or a net seller in the market. The second stage models the quantity bought (sold) for net buyers (sellers) based on observable household characteristics. Using household data from Kenyan and Ethiopian livestock markets, we find evidence in favor of sequential decision making, the welfare implications of which we discuss.

Fish Is Food - The FAO’s Fish Price Index

World food prices hit an all-time high in February 2011 and are still almost two and a half times those of 2000. Although three billion people worldwide use seafood as a key source of animal protein, the Food and Agriculture Organization (FAO) of the United Nations–which compiles prices for other major food categories–has not tracked seafood prices. We fill this gap by developing an index of global seafood prices that can help to understand food crises and may assist in averting them. The fish price index (FPI) relies on trade statistics because seafood is heavily traded internationally, exposing non-traded seafood to price competition from imports and exports. Easily updated trade data can thus proxy for domestic seafood prices that are difficult to observe in many regions and costly to update with global coverage. Calculations of the extent of price competition in different countries support the plausibility of reliance on trade data. Overall, the FPI shows less volatility and fewer price spikes than other food price indices including oils, cereals, and dairy. The FPI generally reflects seafood scarcity, but it can also be separated into indices by production technology, fish species, or region. Splitting FPI into capture fisheries and aquaculture suggests increased scarcity of capture fishery resources in recent years, but also growth in aquaculture that is keeping pace with demand. Regionally, seafood price volatility varies, and some prices are negatively correlated. These patterns hint that regional supply shocks are consequential for seafood prices in spite of the high degree of seafood tradability.

Rising Food Prices, Food Price Volatility, and Social Unrest

Can food prices cause social unrest? Throughout history, riots have frequently broken out, ostensibly as a consequence of high food prices. Using monthly data at the international level, this article studies the impact of food prices - food price levels as well as food price volatility - on social unrest. Because food prices and social unrest are jointly determined, data on natural disasters are used to identify the causal relationship flowing from food price levels to social unrest. Results indicate that for the period 1990-2011, food price increases have led to increases in social unrest, whereas food price volatility has not been associated with increases in social unrest. These results are robust to alternative definitions of social unrest, to using real or nominal prices, to using commodity-specific price indices instead of aggregated price indices, to alternative definitions of the instrumental variable, to alternative definitions of volatility, and to controlling for non-food-related social unrest.

The Welfare Impacts of Commodity Price Volatility: Evidence from Rural Ethiopia

How does commodity price volatility affect the welfare of rural households in developing countries, for whom hedging and consumption smoothing are often difficult? When governments choose to intervene in order to stabilize commodity prices, as they often do, who gains the most? This article develops an analytical framework and an empirical strategy to answer those questions, along with illustrative empirical results based on panel data from rural Ethiopian households. Contrary to conventional wisdom, we find that the welfare gains from eliminating price volatility are increasing in household income, making food price stabilization a distributionally regressive policy in this context. Copyright 2013, Oxford University Press.

Rising Food Prices, Food Price Volatility, and Political Unrest

Do food prices cause political unrest? Throughout history, riots appear to have frequently broken out as a consequence of high food prices. This paper studies the impact of food prices on political unrest using monthly data on food prices at the international level. Because food prices and political unrest are jointly determined, the incidence of natural disasters in a given month is used in an attempt to identify the causal relationship between food prices and political unrest. Empirical results indicate that between January 1990 and January 2011, food price increases have led to increased political unrest, whereas food price volatility has been associated with decreases in political unrest. These findings are consistent with those of the applied microeconomics literature on the welfare impacts of food prices.

The Productivity Impacts of Formal and Informal Land Rights: Evidence from Madagascar

This paper studies the relationship between land rights and agricultural productivity. Whereas previous studies used proxies for soil quality and instrumental variables to control for the endogeneity of land titles, the data used here include precise soil quality measurements, which in principle allow controlling for the unobserved heterogeneity between plots. Empirical results suggest that formal land rights (i.e., land titles) have no impact on productivity, but that informal land rights (i.e., landowners’ subjective perceptions of what they can and cannot do with their plots) have heterogeneous impacts on productivity. (JEL K11, Q15)

Household-Level Livestock Marketing Behavior Among Northern Kenyan and Southern Ethiopian Pastoralists

Pastoralists in East Africas arid and semi-arid lands (ASAL) regularly confront climatic shocks triggering massive herd die-offs and loss of scarce wealth. On the surface, it appears puzzling that pastoralists do not make extensive use of livestock markets to offload animals when climatic shocks temporarily reduce the carrying capacity of local rangelands, and then use markets to restock their herds when local conditions recover. In recent years, donors and policy makers have begun to hypothesize that investments in livestock marketing systems might quickly pay for themselves through reduced demand for relief aid,by increasing pastoralist marketing responsiveness to temporal variation in range conditions.

On the Measurement of Food Waste

According to the Food and Agriculture Organization of the United Nations, one-quarter to one-third of all the food produced worldwide is wasted. We develop a simple framework to systematically think about food waste based on the life cycle of a typical food item. Based on our framework, we identify problems with extant measures of food waste and propose a more consistent and practical approach. In so doing, we first show that the widely cited, extant measures of the quantity and value of food waste are inconsistent with one another and overstate the problem of food waste. By misdirecting and misallocating some of the resources that are currently put into food waste reduction efforts, this overstatement of the problem could have severe consequences for public policy. Our framework then allows documenting the points of intervention for policies aimed at reducing the extent of food waste in the life cycle of food and the identification of interdependencies between potential policy levers.

On the (Mis)Use of Wealth as a Proxy for Risk Aversion

Tests of risk sharing in the contracting literature often rely on wealth as a proxy for risk aversion. The intuition behind these tests is that since contract choice is monotonic in the coefficients of risk aversion, which are themselves assumed monotonic in wealth, the effect of a change in wealth on contract choice is clearly identified. We show that tests of risk sharing relying on wealth as a proxy for risk aversion are identified only insofar as the econometrician is willing to assume that (a) the principal is risk neutral or her preferences exhibit constant absolute risk aversion (CARA); and (b) the agent is risk neutral.

Insecure Land Rights and Share Tenancy: Evidence from Madagascar

Most studies of tenurial insecurity focus on its effects on investment. This paper studies the hitherto unexplored relationship between tenurial insecurity and land tenancy contracts. Based on distinct features of formal law and customary rights in Madagascar, this paper augments the canonical model of sharecropping by making the strength of the landlord’s property right increasing in the amount of risk she bears within the contract. Using data on landlords’ subjective perceptions in rural Madagascar, empirical tests support the hypothesis that insecure property rights drive contract choice but offer little support in favor of the canonical risk sharing hypothesis. (JEL K11, Q15)