are we risking too much perspectives on risk in farm modelling risk and uncertainty have been extensively studied by agricultural economists in this paper we question a the predominant use of static frameworks to formally analyse risk b the predominant focus on risk aversion as the motivation for considering risk and c the notion that explicitly probabilistic models are likely to be helpful to farmers in their decision making we pose the question for a risk averse farmer what is the extra value of a recommendation derived from a model that represents risk aversion compared to a model based on risk neutrality the conclusion reached is that for the types of the decision problems most commonly modelled by agricultural economists the extra value of representing risk aversion is commonly very little

uncertainty and sustainability in the management of rangelands abstract we analyze a dynamic and stochastic ecological economic model of grazing management in semi arid rangelands the ecosystem is driven by stochastic precipitation a risk averse farmer chooses a grazing management strategy under uncertainty such as to maximize expected utility from farming income grazing management strategies are rules about which share of the rangeland is given rest depending on the actual rainfall in that year in a first step we determine a myopic farmer s optimal grazing management strategy and show that a risk averse farmer chooses a strategy such as to obtain insurance from the ecosystem the optimal strategy reduces income variability but yields less mean income than possible in a second step we analyze the long run ecological and economic impact of different strategies we conclude that a myopic farmer if he is sufficiently risk averse will choose a sustainable grazing management strategy even if he does not take into account long term ecological and economic benefits of conservative strategies

minimum wage and real wage inequality evidence from pass through to retail prices this paper considers the impact of the minimum wage on both labor and product markets using detailed store level scanner data i provide empirical evidence that a 10 increase in the minimum wage r

incorporating risk aversion into dynamic programming models most previous stochastic dynamic programming dp applications have assumed that decision makers are risk neutral however risk permeates both intrayear and interyear relationships in most dp problems incorporating risk aversion to intrayear outcomes alone can violate the independence assumption of expected utility and can destabilize long run equilibrium returns aversion to riskiness of the long run returns suppresses the effect of sequential resolution of risk over time because tolerance of short run versus long run risk varies in dynamic situations procedures for incorporating risk aversion should accommodate this variation more research on risk averse dp formulations is needed

testing the stochastic structure of production a flexible moment based approach conventional production function specifications are shown to impose restrictions on the probability distribution of output that cannot be tested with the conventional models these restrictions have important implications for firm behavior under uncertainty a flexible representation of a firm s stochastic technology is developed based on the moments of the probability distribution of output these moments are a unique representation of the technology and are functions of inputs large sample estimators are developed for a linear moment model that is sufficiently flexible to test the restrictions implied by conventional production function specifications the flexible moment based approach is applied to milk production data the first three moments of output are statistically significant functions of inputs the cross moment restrictions implied by conventional models are rejected

incorporating risk in production analysis risk is the farmer s perennial problem unfortunately agricultural economists have made little progress in analyzing or measuring production risk in ways that provide useful information for farm management therefore it is fair to say that the social returns to existing research on production risk are probably low it is from this perspective that i will discuss incorporating risk in production analysis my purpose is not to survey the literature or to catalog all the ways risk concepts have been incorporated in production models rather i intend to evaluate critically some of the basic concepts and approaches in the literature and to indicate the directions i believe research must take to arrive at a paradigm for incorporating risk in production analysis that could yield higher social returns in my view the conventional conceptual framework used for risk analysis has not led agricultural economists to ask the most important questions about the effects risk has on agricultural decision making the extension of the static neoclassical production model to incorporate price and production uncertainty has led agricultural economists to rationalize observed behavior in terms of the arrow pratt risk aversion concept this approach has led in turn to qualitative comparative static theorems which are appealing to theorists but have little relation to the decision problems farmers face to increase the relevance of their models and methods i believe agricultural economists need to understand specifically how risk affects agricultural production this in turn will suggest how risk affects agricultural decision making and why farmers are or should be concerned with it my analysis of these issues leads me to discount the hypothesis that risk matters primarily because of the psychic disutility it causes rather i hypothesize that risk matters primarily because production is a dynamic phenomenon and therefore production and price uncertainty affect expected productivity and expected income i hypothesize that these firstorder effects are why farmers are and should be concerned with risk the analysis of dynamic uncertain models shows that farmers optimal decisions are affected by risk whether they are risk neutral or risk averse this suggests that dynamic risk neutral models may be more useful than conventional static risk averse models for understanding the role production risk plays in farm management

minimum wage effects on labor market outcomes under search matching and endogenous contact rates building upon a continuous time model of search with nash bargaining in a stationary environment we analyze the effect of changes in minimum wages on labor market outcomes and welfare although minimum wage increases may or may not lead to increases in unemployment in our model they can be welfare improving to labor market participants on both the supply and demand sides of the labor market we discuss identification of the model using current population survey data on accepted wages and unemployment durations and show that by incorporating a limited amount of information from the demand side of the market it is possible to obtain credible and precise estimates of all primitive parameters we show that the optimal minimum wage in 1996 depends critically on whether or not contact rates can be considered to be exogenous and we note that the limited variation in minimum wages makes testing this assumption problematic

the minimum wage restaurant prices and labor market structure using store level and aggregated consumer price index data we show that restaurant prices rise in response to minimum wage increases under several sources of identifying variation we introduce a general model of employment determination that implies minimum wage hikes cause prices to rise in competitive labor markets but potentially fall in monopsonistic environments furthermore the model implies employment and prices are always negatively related therefore our empirical results provide evidence against the importance of monopsony power for understanding small observed employment responses to minimum wage changes our estimated price responses challenge other explanations of the small employment response too

do minimum wage hikes raise us long term unemployment evidence using state minimum wage rates partridge m d and partridge j s 1999 do minimum wage hikes raise us long term unemployment evidence using state minimum wage rates reg studies 33 713 726 several recent studies have challenged the conventional notion that raising the minimum wage reduces employment this study considers a related but relatively unexplored issue by examining the minimum wage s influence on long durations of unemployment by considering long term unemployment rates this study extends the previous minimum wage literature by examining the persistence of minimum wage effects the empirical analysis considers state data from the latter 1980s a unique period when many states raised their minimum wage above the federal level the results suggest that a greater minimum wage increases long term unemployment rates further evidence indicates that increased minimum wage coverage also raises long term unemployment rates subsequent analysis yielded similar patterns for other aggregate labour market measures thus state

principles of dynamic optimization in resource management abstract the type of resource problem amenable to static analysis is distinguished from that requiring dynamic analysis possibly due to the apparent complexity of optimal control theory methods often dynamic models have not been applied where they would be appropriate in this article dynamic programming arguments are used to derive optimality conditions directly and simply they are derived for a renewable resource such as a fishery but they have application to resource management in general the approach is illustrated by examples to the extraction of a depletable resource to feeding for weight gain and to applying fertilizer when some fertilizer carriers over from one crop season to another conditions for the optimal replacement of biological units are also considered

long run versus short run planning horizons and the rangeland stocking rate decision reduced future forage production diminished range condition and reduced animal performance have been major factors considered when setting rangeland stocking rates the relative economic importance of diminished current period animal performance versus intertemporal forage production impacts was investigated using a dynamic optimal control model the model is applied to yearling stocker production in eastern colorado results indicate that intertemporal grazing impacts to forage production are not that important reduced weight gain during the current period drives the economic stocking rate decision further ranchers have no economic incentive as profit maximizers to continually overgraze the range

investment and disinvestment principles with nonconstant prices and varying firm size applied to beef breeding herds variable beef breeding herd sizes are found to be optimal given cyclical beef prices traditional replacement theory does not allow variable firm size because unequal investment replacement and disinvestment culling rates are not possible if firm size changes cost of production per unit endogenously changes given a u shaped cost curve optimal investment and disinvestment rules for variable firm size are developed based upon the firm s cost curve and discounted net revenue flows for a finite rolling planning horizon current and future investment and disinvestment decisions are linked by their mutual effect on firm size and hence production cost per unit

long term sustainability of third party facilitated market linkages evidence from the usda marketing assistance program in the armenian dairy industry abstract public private partnerships are increasingly seen as an important tool to build agri food supply chains and develop markets for agri food products in emerging economies however many of these initiatives fail when the public component of the program ends one exception is the usda market assistance program map that facilitated the redevelopment of the armenian dairy sector after privatization this paper presents a case study of this initiative and hypothesize that the usda map facilitated farmer investment in private enforcement capital this investment resulted in sustainable market relationships between farmers and dairy processors even after the usda map expired we find empirical evidence to support this hypothesis using a panel dataset collected from 172 armenian dairy farmers in 2004 and 2009

calibration of agricultural risk programming models abstract positive mathematical programming pmp is one of the most commonly used methods for calibrating activity programming models in this article we consider pmp as a calibration method for risk programming models with a mean variance e v specification we argue that the restrictive theoretical assumptions employed by typical linear e v models limit their applicability in analyzing the effects of decoupled payments on agricultural production decisions furthermore the requirement for eliciting a risk aversion coefficient renders such models incompatible with the pmp method for this reason we propose a nonlinear e v specification and develop a pmp based procedure for its calibration which does not aim at introducing further nonlinearities in the objective function but at recovering the true distribution of wealth that will allow the final model to reproduce base year observations we also examine how our approach relates to the recent pmp developments on calibration against elasticity priors and we show how such priors can be used for the calibration of the nonlinear e v model

robbins on economic generalizations and reality in the light of modern econometrics this paper examines lionel robbins critical attitude towards formal empirical work from the standpoint of modern econometrics it argues that his attitude towards empirical work rested on indefensible assumptions and that he failed to realise that the role he saw for empirical work undermined his belief in the primacy of economic theory this matters because robbins attitudes are echoed in modern economics best exemplified by the calibration methodology of kydland and prescott which is vulnerable to similar criticisms

job and wage mobility with minimum wages and imperfect compliance we propose a job search model with minimum wage regulations and imperfect compliance to explain the doubling of the mean and variance of hourly earnings of white males during the first 18 years of labor market experience the model encompasses job mobility and on the job wage growth as sources of wage dynamics and is estimated by simulated generalized method of moments using data from the national longitudinal survey of youths 1979 our estimates provide a good fit for the observed levels and trends of the main job and wage mobility data and for the increase in the mean and variance of wages over the life cycle as well as for the fall in the fraction of workers paid below the minimum wage job mobility explains 40 50 of the observed wage growth increases in the minimum wage and or compliance deliver small effects on the wage distribution and the nonemployment rate

contract enforcement social efficiency and distribution some experimental evidence we use economic experiments to investigate how different contract enforcement regimes affect efficiency and the distribution of surplus in a vertically coordinated market with buyer concentration we find that if a third party e g government perfectly enforces contracts social efficiency is enhanced we also find that when third party enforcement is imperfect social efficiency will not necessarily decrease because trading partners find ways to self enforce contracts however opportunistic behavior by some traders leaves some sellers growers with ex post profits below reservation levels finally partial or one sided third party enforcement causes significant efficiency losses by constraining subjects ability to use informal enforcement instruments

spice price spikes simulating impacts of saffron price volatility in a gendered local economy wide model summary access to international markets provides smallholders with unprecedented opportunities but also exposes them to world market whims we use a local economy wide impact evaluation lewie model to analyze how the recent global saffron price variability affected morocco s taliouine taznakht region a specialized agro export economy with a stark gender division of labor prices of saffron increased by 71 per year over the 2007 09 period before falling quickly back to their trend our modeling approach allows us to simulate such shocks and evaluate impacts not only on producers but also on the local economies around them in our simulations positive price shocks and increases in productivity both cause large reallocations of labor resources particularly for female workers at harvest time we use monte carlo simulations to evaluate how saffron price variance affects the economy female wage income is especially sensitive to global price variability a 100 increase in saffron price variance leads to 133 increase in female wage income variance but only 36 for males accounting for general equilibrium effects is critical for understanding the ramifications of exposure to export price volatility in poor economies

fertilizer use risk and off farm labor markets in the semi arid tropics of india a two period model is developed in which a risk averse farmer uses off farm labor to smooth consumption leading to greater use of fertilizer fertilizer demand is shown to increase with the depth of the off farm labor market controlling for exogenous weather risk farmers use more fertilizer the lower the unemployment rate and the higher the share of nonagricultural work in total off farm labor the results suggest that off farm labor markets and own farm production may be complementary in risky production environments so that policies which promote the depth of the off farm labor market in low income areas may also bolster farm productivity copyright 2003 oxford university press

heteroscedasticity or production risk a synthetic view two veins of literature namely production risk literature and stochastic frontier analysis are examined both fields are concerned of output variation the former due to exogenous shocks the latter due inefficiency by covering the literature from both the fields this review suggests that the concept of heteroscedasticity can be utilized to build a synthesis between these mainly separate branches of literature however the synthetic approach brings a challenge how to differentiate between different sources of output variation this challenge is identified as the main obstacle to meaningfully combine the two approaches

stochastic modeling of short term cattle operations rangeland productivity is influenced primarily by fluctuating rainfall precipitation which together with market price volatility determine the major sources of variability in profitability of rangeland cattle production much research in range science has dealt with long term planning based on annual management models cotner sharp burt stevens and godfrey karp and pope and fisher among others short run decisions such as stocking rate stocking density over a length of grazing season and optimal forage at the beginning end of the grazing season have been considered static through time this study emphasizes short run decisionmaking strategies to better understand complex cattle and forage management decisions within a grazing season dynamic programming dp is used to test the certainty equivalence ce property of these intertemporal decisions to allocate scarce resources under fluctuating conditions involved in cattle production the objectives of this study are threefold a to develop a model of forage livestock dynamics b to evaluate the effect of price fluctuations on cattle and forage management policies principally stocking density and c to incorporate risk into a sequential decision making process such as a yearling operation to test the ce property our study is focused on testing ce and its applications for risk management using a forward recursive dp process

risk aversion versus expected profit maximization with a progressive income tax this article introduces the terms apparent or pseudo risk aversion to represent those situations where real risk aversion is falsely attributed simply because second and higher moments of random variables are arguments in a decision maker s objective function apparent risk aversion can occur when stochastic variables nonlinearly enter the objective function the progressive income tax structure is highlighted as a neglected but important source of apparent risk aversion such sources of apparent risk aversion should be recognized otherwise an incorrect level of risk aversion might be claimed or risk aversion might be claimed when risk neutrality prevails

the impact of the minimum wage if workers can adjust effort abstract in traditional models a binding minimum wage creates a excess supply of low skilled workers for minimum wage jobs employment falls and some jobs are reallocated from high to low rent workers this disequilibrium cannot persist competition to secure the property rights to now scarce jobs undoes most of the effects of the minimum wage workers who attach the highest value to the jobs are willing to work harder to keep them marginal workers are squeezed out of the market as high rent workers ratchet up effort level this process erodes the rent conferred by the minimum wage but also increases the value of marginal product which reduces the size of the employment effect the minimum wage confers more money income on low skilled workers and creates some distortion in the optimum combination of wage rate and effort level under plausible conditions the minimum wage has little effect on rent employment output and profits

multiple equilibria and minimum wages in labor markets with informational frictions and heterogeneous production technologies it is often argued that a mandatory minimum wage is binding only if the wage density displays a spike at it in this article we analyze a model with search frictions and heterogeneous production technologies in which imposition of a minimum wage affects wages even though after imposition the lowest wage in the market exceeds the minimum wage the model has multiple equilibria as a result of the fact that the reservation wage of the unemployed and the lowest production technology in use affect each other imposition of a minimum wage may improve social welfare

the cost of agricultural production risk abstract we examine the relative influence of preferences and technology on producers ex ante willingness to pay for a reduction in production risk a risk averse producer pays both an arrow pratt risk premium to stabilize income and a production premium to stabilize yield using soil nitrate risks as our motivating example we demonstrate that the production premium accounts for 40 85 of producers willingess to pay for risk reduction these results demonstrate the relative importance of technology over risk preferences when estimating the costs of agricultural production risk

investment and disinvestment principles with nonconstant prices and varying firm size applied to beef breeding herds comment optimal investment and disinvestment principles have received considerable attention in both general and agricultural economics for over two centuries notable are the works of faustmann samuelson 1937 hirschleifer burt and perrin which establish the basic replacement principle recently trapp presented a reformulation of this basic replacement principle by relaxing the assumptions of constant prices and firm size the purpose of this comment is to discuss a possible misinterpretation of the replacement principle underlying trapp s model specifically the link between trapp s article and previous literature is established with the hope of clarifying any misunderstandings of optimal investment principles trapp states that his equations 3 and 4 which are derived from the discrete time form of the net present value formula for a single asset constitute the appropriate addition and culling investment and disinvestment decision rules for a firm with nonconstant size trapp p 694 this formulation is analogous to perrin s equation 2 which maximizes the returns from an asset over a single rotation in contrast chavas kliebenstein and crenshaw present the asset replacement decision as an optimal control problem with an infinite planning horizon transversality conditions for optimal asset rotation as given in chavas kliebenstein and crenshaw s equation 12 correspond to perrin s equation 4 2 which maximizes the returns from an asset over an infinite horizon reid and bradford in an investigation of investment and disinvestment in farm machinery also derive optimal rotation criteria analogous to perrin s formulation thus it appears that an inconsistency exists in the journal associated with the appropriate replacement rule when expansion and contraction of an operation is endogenously determined should replacement rules be derived from an infinite horizon specification or from a single asset specification the merits of an investment decision must be based not only on earnings from the next production period but also on the rents which can be extracted from the firm s fixed factors failure to consider future assets in a replacement decision implies that changes in replacement costs have absolutely no effect on the optimal life of assets up to the point where it is no longer profitable to operate specifically maximizing over a single asset rotation corresponds to maximizing the internal rate of return of an investment decision with a discount rate quivalent to the internal rate of return samuelson 1976 the quantitative effects of considering only a single asset specification are minimal depending on the length of the asset rotation and the discount rate employed as the rotation length increases or a larger discount rate is employed representation of the optimal replacement rule will converge to perrin s equation 2 samuelson 1976 the turnpike theorem states that if the asset rotation is of sufficient length where the end of the horizon has o influence on period decisions the system then converges towards the von neumann path boussard too short a length may result in the system never converging toward the von neumann path alternatively if the salvage and acquisition values are equal at any point in time then the von neumann path will be reached at the beginning of the last period however in general asset replacement is costly and thus access to the von neumann path is not instantaneous the apparent inconsistent use of a single asset specification in contrast to basic replacement principles associated with an infinite horizon may be resolved by investigating the theoretical results in chavas and klemme employing an optimal control methodology with a finite planning horizon t a distinction among rules derived from alternative specifications is evident using perrin s terminology chavas and klemme generalize the replacement criteria for a system with multiple constraints

disentangling the minimum wage puzzle an analysis of worker accessions and separations changes in the legislation in the mid 1980s in portugal provide remarkably good conditions for analysis of the employment effects of mandatory minimum wages as the minimum wage increased sharply for a very specific group of workers relying on a matched employer employee panel data set we model gross worker flows accessions and separations in continuing firms as well as in new firms and those going out of business using a count regression model applied to proportions employment trends for teenagers the affected group are contrasted to those of older workers before and after the raise in the youth minimum wage the major effect on teenagers of a rising minimum wage has been the reduction of separations from the employer which during the period under analysis has compensated for the reduction of accessions to new and continuing firms in this sense our results can reconcile some of the previous evidence in the empirical literature when analyzing the aggregate impact of the minimum wage on youth employment without decomposing it by type of worker flow jel d21 j23 j38

choosing children s environmental risk a model of endogenous risk provides a foundation to study a parent s child care decisions when the child could be exposed to an environmental hazard e g toxic substance foodborne pathogen the parent invests in childcare quality and quantity to reduce the likelihood of a hazard exposure occurring and to reduce its severity if the exposure is realized we supply conditions to sign unambiguously the effects on a child s hazard exposure of an increased probability a parent fails to access or have command over a technique of exposure prevention or that a technique is ineffective in preventing exposure also we consider these effects when the parent is unsure what a technique can do to reduce the child s probability of exposure we conclude public policies designed to encourage use of a particular childcare technique if childcare quality and quantity are stochastic substitutes can reduce parental use of other techniques the net impact of the policy could increase the chance the child suffers

pests and pesticides risk and risk aversion abstract theoretical and applied literature on risk in decision making for agricultural pest control is reviewed risk can affect pesticide decision making either because of risk aversion or because of its influence on expected profit it is concluded that risk does not necessarily lead to increased pesticide use by individual farmers uncertainty about some variables such as pest density and pest mortality does lead to higher optimal pesticide use under risk aversion however uncertainty about other important variables such as output price and yield leads to lower optimal levels of pesticide use neglect of these variables in most studies has led to the false assumption that pesticides are always risk reducing inputs furthermore there is evidence that in general the pesticide dosage which maximises expected profit is lower under risk than under certainty depending on the balance of forces to increase and decrease pesticide use under risk in many circumstances the net effect of risk on optimal decision making for pest control may be minimal the effect on risk of information about pest density and other variables as in integrated pest management programmes is discussed evidence on this issue is mixed a range of analytical techniques for analysing risk in pest control is reviewed throughout the paper gaps in the existing literature are identified

managing increasing environmental risks through agrobiodiversity and agrienvironmental policies abstract agro biodiversity can provide natural insurance to risk averse farmers by reducing the variance of crop yield and to society at large by reducing the uncertainty in the provision of public good ecosystem services such as e g co2 storage we analyze the choice of agro biodiversity by risk averse farmers who have access to financial insurance and study the implications for agri environmental policy design when on farm agro biodiversity generates a positive risk externality while increasing environmental risk leads private farmers to increase their level of on farm agro biodiversity the level of agro biodiversity in the laissez faire equilibrium remains inefficiently low we show how either one of two agri environmental policy instruments can cure this risk related market failure an ex ante pigouvian subsidy on on farm agro biodiversity and an ex post compensation payment for the actual provision of public environmental benefits in the absence of regulation welfare may increase rather than decrease with increasing environmental risk if the agroecosystems is characterized by a high natural insurance function low costs and large external benefits of agro biodiversity

optimal replacement policies for rejuvenated assets the faustmann samuelson solution for optimal asset rotation is extended to consider both asset rejuvenation and nonconstant prices a dynamic theoretical model is developed in terms of an optimal control problem with discontinuous control variables and numerical solution procedures are outlined the model is applied to layer hen replacement where hen rejuvenation by forced molting is a common industrial practice results indicate a sensitivity between the decision to rejuvenate or replace a hen and the egg price cycle suggesting a mixed rotation strategy

the economics of agricultural decollectivization in east central europe and the former soviet union 1989 include both the privatization of agricultural production assets and the restructuring of state and collective farms farm restructuring and more specifically the breakup of large scale agricultural production units into individually operated farms a process we define as decollectivization differ considerably for the various ece and fsu countries differences in decollectivization can be observed across countries between regions within a country and over time we argue that these differences are not random this article identifies the factors that affect the decollectivization process and shows how they are consistent with empirically observed differences in agricultural decollectivization in ece and fsu countries the decollectivization process is a consequence of the decision of collective farm members to leave the collective production framework and start up individual farms factors affecting this decision are the expected productivity and profitability of individual farming relative to collective farming and the costs for individuals to leave the collective farm and start up an individual farm these costs are affected by land reform privatization and decollectivization regulations the relative productivity of individual versus collective farming depends on the distribution of collective farmers productivity the prereform average collective farm productivity and the advantages and disadvantages of individual farming compared to collective farming the literature on decollectivization identifies both advantages and disadvantages in collective production some of which would not extend beyond the transition period disadvantages include high transaction costs associated with the monitoring of labor and inefficiencies due to the right of

the elusive effects of minimum wages the main theme of david card and alan krueger s book myth and measurement the new economics of the minimum wage is that the data do not support the view that minimum wages reduce employment the most important chapter considers data for the fast food industry where it is suggested that recent minimum wage increases may actually have increased employment contrary to the standard theorem that labor demand curves slope down a more reasonable view of the evidence in this book and in many other studies going back to 1915 is that the employment effects of minimum wages are small and difficult to detect in the noisy data available

impact of third party contract enforcement in agricultural markets a field experiment in vietnam we study the effect of alleviating the information asymmetry regarding product quality that is widespread in contracts between agricultural producers and buyers in developing countries opportunistic buyers may underreport quality levels to farmers to reduce the price that they have to pay in response farmers may curb investment thereby negatively affecting farm productivity in an experiment we entitle randomly selected smallholder dairy farmers in vietnam who are contracted by a large company to independently verify milk testing results results indicate that treatment farmers use 12 more inputs and they also increase their output significantly some wider research and policy implications are discussed

how private contract enforcement mechanisms can succeed where public institutions the enforcement of contracts is necessary for efficient exchange and investment in economic activities contracts can be enforced through a variety of mechanisms both public and private however in many developing and transitional countries these public institutions are either absent or ineffective in ensuring contract enforcement under such conditions private enforcement mechanisms may provide a suitable replacement for public enforcement institutions this may be done externally through a third party or internally through self enforcing agreements this paper analyzes the use of self enforcing arrangements or internal private enforcement mechanisms using a case study of an agri business in a transition economy juhocukor a s a slovakian sugar processor we show that the use of internal private contract enforcement mechanisms can have a significant positive effect on output and efficiency for both partners to the exchange transaction in an environment characterized by the absence or ineffectiveness of public enforcement institutions

modeling dynamic agricultural production response the case of swine production crop and livestock production processes are typically dynamic and involve growing biological assets which are eventually marketed this study presents a production model of biological growth based on a differential equation specification economic implications for optimal input use and optimal replacement policy are discussed in this context the approach is applied to the growing finishing phase of a swine production enterprise the results demonstrate that the knowledge of the growth function is crucial in evaluating dynamic production decisions

theory and evidence on the political economy of the minimum wage this paper examines how closely the minimum wage has been set to the most popularly stated goals of minimun wage policy i first estimate these goals the minimum wage rate at which the relevant labor demand is unitary elastic maximizing the total earnings of minimum wage workers about 5 35 and the level that would lift a typical minimum wage worker s family out of poverty about 5 17 i can reject that the actual minimum wage policy has been driven by desire to achieve these goals and find that a simple interest group model best explains the historical path of the minimum wage rate

the employment effect in retail trade of california s 1988 minimum wage increase in this article we study the labor market effect of california s 1988 minimum wage increase in the retail trade industry two different approaches to evaluating the minimum wage effects suggest that the textbook economic analysis of minimum wages pertains employment growth in california s low wage retail trade sector appears to have been tempered by the minimum wage increase

the response of peasant farmers to price incentives the use and misuse of profit functions recent famines in chad ethiopia and the sudan have highlighted a major problem facing less developed countries how does an ldc become self sufficient in food production the answers to this question range from the narrowly defined economic one or economistic approach to the more widely based institutional reforms approach the former approach typified by say schultz 1964 or the world bank 1982 would emphasise the importance of mainly price incentives the latter approach as typified by myrdal 1968 in his monumental work asian drama would emphasise the importance of land reforms as a pre condition for agricultural development the debate has sometimes followed a misleading path and discussed whether peasants are rational or whether they are lazy inert tradition bound etc the aim of this article is to show that the use of profit functions to model peasant behaviour in ldcs is seriously flawed neo classical economic theory within which profit functions are embodied ignores the historical social institutional and political context within which peasant farmers operate peasant farmers do not operate in full blooded capitalist impersonal competitive input and output markets the article is structured as follows section ii outlines the profit function approach and section iii provides a survey and critique of applications of the profit function to ldc agriculture section iv concludes with some general remarks on analysing peasant behaviour in an alternative paradigm

implications for minimum wage policies of an s shaped labor supply curve abstract a model of family labor supply provides a rationale for raising minimum wages when the labor supply response is negative at low wages under those circumstances the labor market can be caught in a malthusian poverty trap of excess supply unemployment overextended workdays child labor and falling wages raising minimum wages may therefore help resorb this excess supply and stabilize the labor market setting a virtuous cycle in motion in a two sector context such a policy would increase wages in both the covered and uncovered sectors evidence from a study of costa rica in particular is consistent with those conclusions

the distributional impacts of minimum wage increases when both labor supply and labor demand are endogenous we develop and estimate a one shot search model with endogenous firm entry and therefore zero expected profits and endogenous labor supply positive employment effects from a minimum wage increase can result as the employment level depends upon both the numbers of searching firms and workers welfare implications are similar to the classical analysis workers who most want the minimum wage jobs are hurt by the minimum wage hike with workers marginally interested in minimum wage jobs benefiting we estimate the model using cps data on teenagers and show that small changes in the employment level are masking large changes in labor supply and demand teenagers from well educated families see increases in their employment probabilities and push out their less privileged counterparts from the labor market this article has supplementary material online

the importance of seasonal variability and tactical responses to risk on estimating the economic benefits of integrated weed management seasonal variability is an important source of risk faced by farmers and regardless of an individual s attitude to risk there are options to tactically adjust production strategies as the outcomes of risk become known the objective of this article is to measure the economic benefits of alternative approaches to managing weeds one of the most serious production problems in australian cropping systems a bioeconomic model that combines weed biology crop growth and economics is developed to value the effects of seasonal variability and the role of tactical responses and sequential decision making in determining an optimal integrated weed management strategy this shows that there are substantial differences in the measured long term benefits from deterministic and stochastic simulations it is concluded that for research evaluation of technologies that involve complex biological and dynamic systems ignoring the impacts of seasonal variability responses to risk and sequential decision making can lead to an incorrect estimate of the economic benefits of a technology in this case study of optimal weed management strategies in australia the size of the error is high

why hold ups occur the self enforcing range of contractual relationships one of my most enjoyable intellectual experiences was working with armen alchian on the klein crawford and alchian 1978 hold up paper in this paper i extend the basic framework presented in that paper pointing out what i now consider to be its shortcomings and providing insights into the nature of hold ups and the form of contracts chosen by transactors to avoid hold ups the major analytical extension entails combining hold up analysis with my work on private enforcement because private enforcement capital is limited and written contract terms are necessarily imperfect transactors must optimally combine court enforced written terms together with privately enforced unwritten terms to define what i call the self enforcing range of their contractual relationship hold ups occur when unanticipated events place the contractual relationship outside the self enforcing range this probabilistic framework where transactors enter contractual relationships knowing that a hold up may take place but believing that the expected gains from trade outweigh the expected rent dissipating costs associated with the hold up risk is shown to have important implications for understanding the structure of contracts adopted by transactors in the marketplace i why do hold ups occur i begin with a simple example that illustrates the basic economic forces involved in a hold up assume that a builder constructs a house on a piece of land the builder does not own but rather only leases short term after the initial land lease expires the landowner could hold up the builder by raising the land rent to reflect the costs of moving the house to another lot this example illustrates all the hold up factors emphasized in klein crawford and alchian a the builder has made an investment that is highly specific to a particular piece of land and b the landowner has taken advantage of the incompleteness of the contract that governs the relationship in particular the fact that the lease does not cover future years to c expropriate the quasi rents on the builder s specific investment the obvious question is why anything like this would ever occur that is why would someone be so naive as to build a house on land for which they had only a short term lease our primary goal in klein crawford and alchian was not to explain the existence of hold ups but rather the institutions adopted by transactors to avoid hold ups for example we would expect that builders anticipating a potential hold up problem would decide to purchase the land or at least to sign a long term ground lease before starting construction however we do present some examples in the paper of hold ups that actually occurred the implicit reason we give for the occurrence of these hold ups is transactor ignorance apparently transactors are not always smart enough to choose the contractual arrangement that would eliminate the hold up problem oliver williamson provides a similar but much more explicit answer to the question of why hold ups occur when defining opportunism he states by opportunism i mean self interest seeking with guile this includes but is scarcely limited to more blatant forms such as lying stealing and cheating opportunism more often involves subtle forms of deceit more generally opportunism refers to the incomplete or distorted disclosure of information especially to calculated efforts to mislead distort obfuscate or otherwise confuse 1 for example the hold up may have occurred in our illustrative house construction example because the landowner deceived the builder with a low up front land rental price and vague promises about the future relying on the ability of one transactor to take advantage of the naivete or ignorance of another transactor is a highly unsatisfactory way to explain the incidence of hold ups simple examples of deception such as a builder constructing a house on land that is only rented short term rarely if ever occur