Vincent H. Smith

Financing agricultural R&D in rich countries: what's happening and why.

Governments everywhere are trimming their support for agricultural R&D, giving greater scrutiny to the support that they do provide, and reforming the public agencies that fund, oversee, and carry out the research. This represents a break from previous patterns, which had consisted of expansion in the public funds for agricultural R&D. Private‐sector spending on agricultural research has slowed along with the growth of public spending in recent years, but the balance continues to shift towards the private sector. This article presents a quantitative review of these funding trends and the considerable institutional changes that have accompanied them. We discuss new data for 22 OECD countries, providing institutional details for five of these countries, and conclude with an assessment of policy developments.

The Demand for Multiple Peril Crop Insurance: Evidence from Montana Wheat Farms

An econometric analysis of the demand for multiple peril crop insurance is carried out for a sample of 370 Montana wheat farms. The study is the first to model the farms participation and coverage-level decisions separately through Heckman two-stage estimation procedures. These decisions are shown to be determined in different ways. In addition, farms with positive expected returns from insurance make coverage-level decisions in different ways from farms with negative expected returns. These differences indicate that adverse selection effects limit the efficacy of across-the-board premium rate increases as mechanisms for reducing loss ratios. Copyright 1996, Oxford University Press.

The private provision of public goods: Altruism and voluntary giving

Abstract A unique data set on exact giving by individual households for the support of a rural health care facility is used to examine the determinants of charitable giving, including the role of altruism. We examine whether a households decision to give or not give and the amount it gives are influenced in the same or different ways by the households characteristics and economic circumstances. We also examine whether a households ‘altruistic history’ affects its current giving decisions.

Rationalizing Agricultural Export Subsidies

A conventional view is that export subsidies are inferior to output subsidies as a means of supporting farm prices. However, when there is an excess burden associated with general taxation measures, due to the distortions in markets arising from collection of taxes and any other costs associated with tax collections, export subsidies may be a component of the most efficient producer price support policy. The arguments in this paper provide a more persuasive rationale for pervasive agricultural export subsidies than does much of the recent literature.

Do Voluntary Biotechnology Labels Matter to the Consumer? Evidence from the Fluid Milk Market

This article examines the effects on the demand of voluntary labeling for the use of genetically modified growth hormone for retail fluid milk using supermarket scanner data. Retail fluid milk tracks one of the first biotechnology products approved, is fairly standardized and ubiquitous, and allows for cross-sectional differentiation between labeled and unlabeled products and between conventional and organic brands. The results indicate that voluntary labeling increases the demand for recombinant bovine growth hormone free milk. In addition, the estimated effects of labeling appear to have increased over time.

Aggregate Sources of Relative Price Variability Among Agricultural Commodities

A measure of relative price variability among forty-seven agricultural commodities is developed for the period 1962 to 1987. Econometric models are used to explore the effects of macroeconomic instability on relative price variability within the agricultural sector. The results show that these relative prices are more variable when actual and unanticipated inflation rates are higher. They may also be more variable during periods when real shocks to the macroeconomy are relatively large. Thus, monetary and fiscal events are not neutral with respect to the agricultural sector because macroeconomic instability appears to create instability and increased uncertainty in agricultural markets.

Economic Impacts of the California One-Variety Cotton Law

The California One-Variety Cotton Law is an important example of technological regulation, in this case intended to serve as a de facto quality control and to mitigate externalities in production that can arise from the mixing of cottonseed at the gin. This paper describes and interprets the economic history of the law, presents a theoretical model of its economic effects, and provides quantitative estimates of the impacts on output, prices, and economic welfare, following a partial deregulation under a 1978 amendment to the law. The analysis shows that large social costs have arisen from concentrating control over the genetic base for California cotton production in the hands of a single government cotton breeder and restricting production to the use of a single selection of a single variety. Some of these costs have been eliminated by the partial deregulation in 1978 to permit private breeders to compete in the provision of genetic material, but production is still restricted to the Acala variety of cotton. While the regulation has benefited some, perhaps even a majority, of the industry participants, it has been increasingly harmful to some other growers and costly overall. The persistence of this costly regulation may be due to the distribution of its impacts: the partial deregulation yielded large increases in aggregate producer surplus but many growers experienced small losses.

The SURE program and incentives for crop insurance participation: A theoretical and empirical analysis

Purpose - The aim of this paper is to show how provisions of the Supplemental Revenue Assistance Payments (SURE) program impacts production practices, and empirically examine changes in crop insurance participation rates as a means of measuring producer responses to the program. Design/methodology/approach - The structure of the SURE program is described and a stylized theoretical model is used to show the SURE programs effects on farm-level crop insurance and production decisions. A county-level cross-sectional empirical specification with regional fixed effects is used to test the hypothesis that producers who are most likely to benefit from production practice re-optimization are more likely to participate in crop insurance. Findings - Results from empirical analyses of corn, soybean, and wheat production areas show that the SURE program has had substantial impacts on crop insurance participation by producers who are more likely to receive SURE indemnities and exploit moral hazard opportunities. Research limitations/implications - Because the program has only recently been introduced, empirical estimates of the programs long-run impacts are not estimable. Practical implications - Results indicate that the program can have unexpected market consequences, with increased frequency and size of SURE indemnity claims than the Congressional Budget Office anticipated and increases in aggregate tax payer subsidies for both the crop insurance and SURE program. These outcomes can have important implications on motivating a restructuring of the program in the next farm bill. Social implications - Increased tax payer expenditures on the SURE and crop insurance programs in the form of subsidies can lead to non-trivial reductions in social welfare. Originality/value - This research is the first to develop a rigorous model of the SURE programs impacts on producer responses and associated effects on crop insurance participation. The study also provides empirical evidence of these effects.

Least-cost cheap-food policies: some implications of international food aid

Many low-income countries pursue cheap-food policies in which consumers pay subsidized prices for bread, rice and other staples. This paper addresses the issue of why different governments select different food subsidy policies, using multiple instruments rather than a simple across-the-board subsidy to provide consumers with access to cheap food. It examines the optimal structure of cheap-food policies in the context of a partial equilibrium model in which the country may be large in trade, and is able to combine import subsidies or tariffs, and output taxes or subsidies, to transfer income to consumers through the market. The model allows for a marginal opportunity cost of government revenues greater than one dollar. In addition, in the model, food aid from overseas may be either given away to the consumer, or given to the government for subsequent sale in the domestic market. The results indicate that only by happenstance will a country choose to use a pure consumption subsidy or a pure import subsidy to transfer income to consumers. In addition, an increase in international food aid does not necessarily lead the government to reduce producer and consumer prices for a commodity.© 1999 Elsevier Science B.V. All rights reserved.

Population Characteristics And Price Dispersion In The Market For Prescription Drugs

We examine the relationship between population characteristics and price dispersion for 75 prescription drugs in five markets. Based on models of price dispersion, we consider that search costs are likely lower for the elderly, who are repeat purchasers. Expected benefits from search are likely higher for low‐income households, who lack insurance. Our results are consistent with the hypothesis that for communities with a large percentage of elderly and poor population, search effort is greater for pharmaceutical drugs, causing lower price dispersion. By understanding the characteristics of who searches for low drug prices, we begin to identify the motives of consumers that might also lead to search for the lowest cost healthcare provider or lowest cost insurance. The results suggest that the Medicare legislation that attempts to close the pharmaceutical doughnut hole may reduce search by the elderly, increase price dispersion, and potentially increase the average price of prescription drugs.