William E. Foster

Collective Marketing Arrangements for Geographically Differentiated Agricultural Products: Welfare Impacts and Policy Implications

We examine the incentives of atomistic producers to differentiate and collectively market products. We analyze market and welfare effects of alternative producer organizations, discuss circumstances under which they will evolve, and describe implications for the ongoing debate between the EU and the United States. As fixed costs of development and marketing increase and the anticipated market size falls, it becomes essential to increase the producer organizations ability to control supply to cover the fixed costs associated with the introduction of differentiated products. Counterintuitively, stronger property right protection for producer organizations may enhance welfare even after a differentiated product has been developed.

Political Preference Functions and Public Policy Reform

A model of policy making is developed where governments seek to maximize support from social groups through the combination of both PERT (social-welfare-increasing) and PERT (welfare-transferring) policies. The implicit weights of a political preference function shift with a change in the relative cost of interest group organizing. Attention is paid to the degree of wealth transfers as total social welfare increases because of PERT policy changes. The model demonstrates that, in the case of two competing groups, the weight given to one group in the allocation of social surplus will increase as total social welfare increases with a bias toward the other group. The relative weights placed on consumers and producers based on PEST policies alone are misleading indicators of the political influence of groups. A number of general implications of this political economic analysis for the reform of public policies are investigated.

Participation in the Farmer-Owned Reserve Program: A Discrete Choice Model

The Food and Agriculture Act of 1977 initiated a fundamental redirection of U.S. grain policy. Previous grain policy revolved around supply control via price supports and marketing quotas or allocations; now the active role of grain reserves is emphasized. The market is given free rein under normal conditions, while grain reserves guard against periods of excessively high or low prices. A cornerstone of the new policy is the farmer-owned reserve (FOR) program. The FOR is designed to stabilize grain prices and contribute to food security by encouraging farmers to hold more grain in storage than they would otherwise. Because the program is voluntary, it is important to understand what motivates participation in the FOR. It is also important to quantify, at least partially, the decision-making process if policy makers are to forecast farmer responsiveness to policy actions. In recent studies addressing this question, little attention has been given to statistical modelling of individual decision making (Meyers and Ryan, Meyers, Jolly and Ryan, Burnstein). This paper describes an empirical model of the FOR participation decision using a theoretical choice model and discrete econometrics. The major provisions of the FOR are first outlined. Next a theoretical choice model based on a stochastic utility function is presented. Crosssection data for corn and wheat producers, gathered by a subcommittee of North Central Regional Project 152 (NC-152), are used to estimate empirical models of the decision-making process. The paper concludes with pertinent policy implications. The Farmer-Owned Grain Reserve

Field-Level Measurement of Land Productivity and Program Slippage

The importance of heterogenous land quality in determining slippage on corn production in North Carolina is quantitatively analyzed. Field-level analysis controls for the influence of land productivity from other factors to determine the significance of the land decisions on slippage. Results show that yield hikes from the diversion of low-quality land by farmers comprise a minor contribution to total increases in average yield.

COMMODITY POLICY, PRICE INCENTIVES, AND THE GROWTH IN PER-ACRE YIELDS

We estimate the influence of policy-induced price changes and of technology supply on North Carolina flue-cured tobacco yields. The decline in land rent and effective output price that accompanied a 1965 policy change from acreage allotments to poundage quotas caused a 12 percent decrease in yields. Farmer yields were more responsive to yield-increasing technologies under acreage allotments than under poundage quotas. Annual yield growth was 0.5 percent under poundage quotas and 4.32 percent under acreage allotments. The growth rate decline is attributable to changes in relative prices and to a slowdown in the supply of available technologies.

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.

Adjustment costs and dynamic factor demands for U.S. cigarette manufacturing

Following the approach of Berndt, Fuss, and Waverman, a dynamic model for U.S. cigarette manufacturing is developed and factor demands estimated. Tobacco and capital stocks are treated as quasi-fixed inputs. The results indicate that there are significant adjustment costs associated with adjusting tobacco stocks, but not with adjusting the capital stock. Short-run, intermediate-run, and long-run output constant elasticities are estimated for inputs in cigarette production. Demand for U.S. tobacco by U.S. cigarette manufacturers is found be more inelastic than shown by previous studies using static models. Cigarettes produced for export appear to differ in their marginal cost of production from cigarettes produced for the sale in the U.S. market.

Producer Welfare Consequences of Regulating Chemical Residues on Agricultural Crops: Maleic Hydrazide and Tobacco

A procedure is presented to calculate welfare consequences of chemical regulation from demand curves when input applications are unobserved, and is applied to maleic hydrazide and tobacco. The relationship between chemical residues and weather variables and prices is estimated, and from this we derive demand curves using an application-residue relationship estimated using research station data. Chemical price levels required to attain given regulatory goals are estimated. Yearly producer losses from a chemical ban range from

The Evolution and Coordination of U.S. Commodity and Resource Policies

6 million to

Mobility, Diversification, and Sustainability of Trade Reform

14 million, two to five times greater than from a tax achieving a 95% assurance rate of residues falling below a proposed standard.