Utpal Vasavada

The Economics of Foreign Direct Investment and Trade with an Application to the U.S. Food Processing Industry

This paper investigates the determinants of foreign direct investment (FDI) and its relationship to trade in the U.S. food processing industry. A representative multinational corporation maximizes profits by choosing between production in the home country, which is exported, and production in a foreign country. This introduces the possibility that foreign affiliate sales can be a substitute and/or complement for exports. The empirical framework consists of a system of four equations with foreign affiliate sales, exports, affiliate employment, and FDI as endogenous variables. The results confirm a small substitution between foreign affiliate sales and exports. The empirical evidence supports the hypothesis that FDI is also protection-jumping.

Restricting Pesticide Use: The Impact on Profitability by Farm Size

A sample of 226 cash grain farms in the Lake States-Corn Belt region are analyzed to estimate the impact of restricting pesticide use on profits. These 226 farms are classified into small, medium, and large farms according to their sale revenues. The results suggest the existence of pest management practices that could substantially reduce pesticide use without incurring economic losses. The reductions in profits associated with gradual reductions in pesticide expenditure appear to increase with farm size.

Multiregional Invasive Species Management: Theory and an Application to Florida's Exotic Plants

This research develops a multiregional optimal control model that incorporates regional allocation of a public budget for controlling invasive plants when regionally differential recreation demand functions and species control costs are present. Our equimarginal condition for optimal budget allocation equates the relative marginal economic benefits per dollar spent across regions. The model was applied to Florida Public Conservation Land regions, and results indicate that the magnitude of an annual management budget affects its distribution among species management regions, but the size of the intrinsic growth rate does not affect the pattern of budget allocation among regions.

TESTING DYNAMIC SPECIFICATIONS FOR IMPORT DEMAND MODELS: THE CASE OF COTTON

Error correction models impose few prior restrictions on dynamic model specification and allow the data to determine model structure. Despite this obvious advantage, few applications have adopted the error correction model to explain trade flows. An error correction model of cotton import demand is estimated for France, Japan, and Hong Kong. A variety of tests are applied to determine the dynamic structure of the model. We find the most general models are those that best fit the data for cotton import demand. Long-run elasticities from these general models are significantly different than elasticities derived from a comparable static model.

Managing Invasive Species in the Presence of Endogenous Technological Change with Uncertainty

This research incorporates the development and adoption of an induced technology under uncertainty into a conceptual dynamic model to more broadly examine efficient policies for mitigating invasive species infestations. We find that under optimal policy, marginal costs of adopting conventional control measures are equal to the sum of the marginal benefits from development and adoption of new technology, as well as the use of conventional control measures. This result implies that a resource allocation designed for controlling invasive species is not adequate when an induced technology is not considered. Our results also reveal that the shadow values associated with the probabilities of developing and then adopting an induced technology increase as the shadow values associated with the stock of an invasive species population increase.

Technology gaps and trade in agriculture

Technology Gaps and Trade in Agriculture. —Linkages between technology, trade, and growth have recently been scrutinized by international trade theorists. By relaxing conventional assumptions such as constant returns to scale and perfect competition, the “new trade theory” literature explains how technology affects trade flows. Using dynamic modeling, technological gaps are found to affect trade shares in a significant way.ZusammenfassungTechnologische Lücken und der internationale Handel mit Agrargütern. —In letzter Zeit haben Theoretiker des internationalen Handels die Beziehungen zwischen Technologie, Außenhandel und Wachstum überprüft. Sie haben die konventionellen Annahmen wie konstante Skalenerträge und vollkommener Wettbewerb abgeschwächt und ihm Rahmen der “neuen Handelstheorie” herausgestellt, wie Technologie die Handelsströme beeinflußt. In diesem Artikel konnte unter Verwendung dynamischer Modelle gezeigt werden, daß technologische Lücken die Handelsanteile auf den internationalen Märkten signifikant bestimmen.