exchange rates and the fiscal theory of the price level abstract this paper addresses exchange rate determination under a nominal interest peg in a two country cash in advance model under two types of cash in advance constraints if both governments peg the nominal interest rate on domestic bonds there is a continuum of equilibria each consistent with different nominal exchange rates and real resource allocations the well known finding of equilibrium uniqueness under a nominal interest rate peg in a closed economy does not survive in a multi country multi currency setting

interactions between monetary and fiscal policy under flexible exchange rates we examine fiscal and monetary policy interactions by developing a two country open economy model under flexible exchange rates where overlapping generations of consumers supply labour to imperfectly competitive firms that change their prices infrequently we show in this context that the implications of lax fiscal policy in country a are significant for country b determinacy can be ensured by adopting a passive monetary policy in either country a or country b in both cases however lack of fiscal feedback in country a will imply that fiscal shocks have significant macroeconomic consequences for both countries we examine how the size of these spillovers is influenced by the degree of debt indexation we also show that the fiscal response required to support an active monetary policy is greater when consumers have finite lives and that the characterisation of active and passive regimes does not depend on whether or not debt is indexed

exchange rate crises and fiscal solvency this paper combines insights from generation one currency crisis models and the fiscal theory of the price level ftpl to create a dynamic ftpl model of currency crises the initial fixed exchange rate policy entails risks due to an upper bound on government debt and stochastic surplus shocks agents refuse to lend into a position for which the value of debt exceeds the present value of expected future surpluses policy switching usually combined with currency depreciation restores fiscal solvency and lending this model can explain a wide variety of crises including those involving sovereign default we illustrate by explaining the crisis in argentina 2001

compatibility between monetary and fiscal policy under emu the debate over the stability and growth pact sgp as a part of european monetary union has highlighted the need to assess the extent to which fiscal policies of union members should be constrained as a pre requisite for price stability within the union in this paper we develop a two country open economy model where each country has overlapping generations of finitely lived consumers who supply labour to imperfectly competitive firms which can only change their prices infrequently we examine the case where the two countries have formed a monetary union but where the fiscal authorities remain independent we show that the fiscal response required to ensure stability of the real debt stock is greater when consumers are not infinitely lived in principle this allows for some compensating behaviour between governments but we show that the scope for compensation is limited the monetary authority can abandon its active targeting of inflation to stabilise the debt of at most one fiscal authority and any other combination of policies will either result in price level indeterminacy and or indefinite transfers of wealth between the two economies finally in a series of simulations we show that fiscal shocks have limited impact on output and inflation provided the fiscal authorities meet the weak requirements of fiscal solvency however when monetary policy is forced to abandon its active targeting of inflation then fiscal shocks have a much greater impact on both output and inflation

input demand under yield and revenue insurance previous studies disagree on the effects of insurance on fertilizer application rates the effect of increased fertilizer on the probability of low yields primarily determines whether fertilizer and insurance are substitutes or complements we estimate conditional distributions of corn yields to determine if the technical relationship between yields and fertilizer supports the hypothesis that insurance increases optimal application rates our results indicate no support for this hypothesis at all nitrogen fertilizer rates and reasonable levels of risk aversion nitrogen fertilizer and insurance are substitutes suggesting that those who purchase insurance are likely to decrease nitrogen fertilizer applications

the basic analytics of moral hazard the basic analytics of moral hazard are developed using the simplest possible model of the insurance market even when the underlying expected utility function and the function relating the accident probability to accident prevention effort are extremely well behaved the indifference curves and feasibility set the set of insurance contracts which at least break even are not indifference curves need not be convex and feasibility sets never are priceand income consumption lines may be discontinuous and effort is not in general a monotonic or continuous function of the parameters of the insurance policies provided

a game theoretic view of the fiscal theory of the price level the goal of this paper is to probe the validity of the fiscal theory of the price level by modelling explicitly the market structure in which households and the government make their decisions i describe the economy as a game and i am thus able to state precisely the consequences of actions that are out of the equilibrium path i show that there exist government strategies that lead to a version of the fiscal theory in which the price level is determined by fiscal variables alone these strategies are however more complex than the simple budgetary rules usually associated with the fiscal theory and the government budget constraint cannot be merely viewed as an equilibrium condition

input use decisions with greater information on crop conditions implications for insurance moral hazard and the environment emerging precision agriculture technologies allow farms to make input decisions with greater information on crop conditions this greater information occurs by providing improved predictions of crop yields using remote sensing and crop simulation models and by allowing farms to apply inputs within the growing season when some crop conditions are already realized we use a stylized model with uncertainty in yield and price to examine how greater information on crop conditions i e a forecast affects input use for insured and uninsured farms we show that moral hazard decreases farms apply more inputs as the forecast accuracy improves when the forecast indicates good yields and vice versa when the forecast indicates bad yields in the long run moral hazard decreases in response to an improvement in forecast accuracy even though moral hazard decreases in the long run indemnity payments are likely to increase in the long run driven by the increase in moral hazard when the forecast indicates bad crop conditions we use the results of our model to discuss the potential impact of different technologies and types of inputs on the federal crop insurance program and the environment

natural resource economics and conservation contributions of agricultural economics and agricultural economists research by agricultural economists on natural resources has been distinguished by an interdisciplinary emphasis and a dynamic perspective it has recognized technological and institutional constraints has been oriented toward solving concrete resource management and policy problems and has emphasized empirical and quantitative analysis agricultural economists have introduced methods for evaluating natural resource conservation efforts for predicting adoption of resource conservation technologies and for designing efficient and sustainable resource management policies they have identified ways of improving land management and preventing land degradation proposed reforms of institutions governing water allocation and water quality and introduced policies for balancing environmental and efficiency considerations in the management of pests biodiversity and livestock diseases their research has had substantial impacts on the formulation of resource conservation policies

insurance moral hazard and chemical use in agriculture this paper examines how crop insurance affects corn farmers fertilizer and pesticide use in the u s midwest crop insurance might be expected to affect chemical use because of moral hazard insured farmers may undertake riskier production than do uninsured farmers results suggest that insurance exerts considerable influence on corn farmers chemical use decisions those purchasing insurance applied significantly more nitrogen per acre 19 spent more on pesticides 21 and treated more acreage with both herbicides and insecticides 7 and 63 than did those not purchasing insurance these results suggest that both fertilizer and pesticides may be risk increasing inputs

the impact of water price uncertainty on the adoption of precision irrigation systems we examine whether a firm is more or less likely to adopt precision technology when input prices are stochastic the results are important to determining whether programs and contracts that reduce input price uncertainty may deter the adoption of conservation practices an economic model of the technology adoption decision shows that the net effect of input price risk is ambiguous and depends on several factors including the shutdown effect the mean price effect the precision expansion effect and the risk aversion effect an empirical implementation of the model relies on data on water price and irrigation technology adoption observed in a california irrigation district over the period 1999 2002 the results show that a stable input price increases the adoption of precision technology but the impact depends on crop choice and land quality characteristics

crop insurance in a political economy an alternative perspective on agricultural policy lawmakers often subsidize farmers in times of financial distress this article models this political impulse as a constraint on government farm policy describing how ex ante government farm insurance can deter ex post disaster relief and improve production incentives by countering the moral hazard that otherwise prevails absent ex ante government policy ex post relief takes the form of revenue insurance which prompts excessive entry into farm production and under production by operating farmers ex ante government policy can raise economic and political welfare by buying out low productivity farmers and offering profitable farmers a combination of revenue insurance price supports and a program participation fee copyright 2003 oxford university press

risk and the value of bt corn a conceptual model is developed to evaluate the effect of bt corn on risk results highlight the importance of distinguishing between marginal and aggregate risk effects and demonstrate that the effect of bt corn on risk depends crucially on the price paid for the technology empirical results show that depending on the price bt corn can be marginally risk increasing or decreasing and can either increase or decrease corn acreage also depending on the price bt corn can provide a risk benefit to farmers even when bt corn is risk increasing bt corn is genetically engineered to produce a protein found in the soil bacterium bacillus thuringiensis bt the protein is toxic to lepidopterous insects such as the european

agricultural land use and asset accumulation in migrant households the case of el salvador abstract this paper examines the effect that international migration and remittances have on agricultural outcomes at the household level in el salvador panel data are used to examine land use allocations agricultural asset accumulation and agricultural input use and returns findings suggest that migration and remittances cause a household to reallocate land away from commercial cash crops toward the production of subsistence food crops there is weak evidence that migration and remittances contribute positively to agricultural asset accumulation in the form of land and livestock holdings further results suggest that migration and remittance do not affect agricultural input use and may decrease the returns to land and labour on farm as migrant households farm their land less intensively than non migrant households

fiscal risk in a monetary union diverse fiscal policies which are subject to fiscal limits and stochastic shocks can threaten price stability in a monetary union the fiscal limits arise due to distortionary taxation and political will stochastic shocks are random and could push a fiscally sound policy towards its limit in equilibrium agents refuse to lend along a path which violates the fiscal limits creating a crisis the crisis requires a policy response to restore lending we focus on two responses default and policy switching both of which must be designed to restore fiscal solvency under the assumption that agents know the policy response we show that default poses no risk to price stability but that policy switching does we simulate the model to quantify fiscal risk in the european monetary union with fiscal variables at end of 2009 values we find that the probability of a fiscal crisis in greece and italy countries whose debt relative to gdp had strayed far above the 60 percent limit is positive but small however a small increase in debt can lead to a large increase in risk

spatial temporal model of insect growth diffusion and derivative pricing insect derivatives represent an important innovation in specialty crop risk management an active over the counter market in insect derivatives will require a transparent pricing method this paper develops an econometric model of the spatio temporal process underlying a particular insect population and develops a pricing model based on this process we show that insect derivatives can play an important risk management role in mitigating b tabaci whitefly damage in cotton beyond developing a new risk management instrument the key methodological contribution of this paper lies in pricing derivatives with stochastic properties in both space and time dimensions copyright 2008 oxford university press

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

government finance in the wake of currency crises we address three questions i can classical models be reconciled with the fact that many crises are marked by high rates of depreciation and small increases in seignorage revenue ii what are the implications of different financing methods for post crisis rates of inflation and depreciation iii how do governments pay for the fiscal costs associated with currency crises to study these questions we use a general equilibrium model in which prospective government deficits trigger a currency crisis we then use our model in conjunction with fiscal data to interpret government financing in the wake of three recent currency crises korea 1997 mexico 1994 and turkey 2001

effects of crop insurance premium subsidies on crop acreage crop insurance premium subsidies affect patterns of crop acreage for two reasons first holding insurance coverage constant premium subsidies directly increase expected profit which encourages more acreage of insured crops direct profit effect second premium subsidies encourage farms to increase crop insurance coverage with more insurance coverage farms obtain more subsidies and farm revenue becomes less variable as indemnities offset revenue shortfalls so acreage of insured crops likely increases indirect coverage effect by exploiting exogenous policy changes and using approximately 180 000 county crop year observations we estimate the sum of these two effects of premium subsidies on the pattern of u s acreage across seven major field crops we estimate that a 10 increase in the premium subsidy causes a 0 43 increase in the acreage of a crop in a county holding the premium subsidy of its competing crop constant taking into account the small share of premium subsidies in expected crop revenue this subsidy impact is analogous to an own subsidy acreage elasticity of 1 24 which exceeds own price acreage elasticity estimates in the literature one explanation for the larger acreage response to premium subsidies is that insurance causes an indirect coverage effect in addition to a direct profit effect

risk assessment under a nonlinear fiscal policy rule i introduction countries around the world are establishing nonlinear fiscal rules whereby governments respond more aggressively to lower deficits when debt is above some threshold level these policies range from the german style debt break which imposes limits on the deficits to fiscal rules that intensify fiscal consolidation at high debt levels the purpose of this paper is to study the implications of a nonlinear fiscal rule on solvency crisis do nonlinear fiscal rules allay the possibility of future insolvency does the increased responsiveness suggested by the nonlinear fiscal rules need to be exhibited at low levels of debt could fiscal authorities offset the stronger responsiveness at high levels of debt with a weaker responsiveness at low levels of debt without altering the probability of a solvency crisis we build on daniel and shiamptanis 2012 framework where negative shocks such as the 2007 2009 worldwide financial turmoil could lead a government to a position where agents refuse to lend thereby creating a solvency crisis to restore lending monetary and fiscal authorities could implement a policy switch in which the fiscal policy switches to active and the monetary policy to passive and the post crisis equilibrium is characterized by the fiscal theory of the price level ftpl 1 their analysis however utilizes a linear fiscal policy rule and assumes that authorities remain in the ftpl regime once they switch this paper modifies daniel and shiamptanis 2012 dynamic policy switching model to allow for a nonlinear fiscal policy rule that governs the evolution of the primary surplus relative to gdp and to allow the authorities to switch back to the original regime an important feature of the nonlinear fiscal rule is that it naturally yields an endogenous stochastic responsiveness to debt to capture changes in policy over time 2 we also build on bohn 1998 who argues that it is sufficient for a sustainable fiscal policy to satisfy the government s intertemporal budget constraint ibc bohn s analysis however does not incorporate a fiscal limit on the size of debt defined as the maximum level of debt that the country can repay bi 2012 bi et al 2010 2013 cochrane 2011 ghosh et al 2013 this paper can be viewed as an extension of bohn 1998 when a country faces fiscal limits we derive the criteria necessary for a nonlinear fiscal rule to satisfy both the government s ibc and eliminate explosive behavior the final contribution of the paper is empirical we apply the model to canada which is often cited as an example of a small open economy that implemented a significant fiscal adjustment lloyd ellis and zhu 2001 we estimate a nonlinear fiscal rule with annual data from 1970 to 2012 and utilize it to quantify the probability of a solvency crisis the following key results emerge first to eliminate explosive behavior the responsiveness of the nonlinear fiscal rule to debt should be larger than bohn s 1998 criterion second a nonlinear fiscal rule lowers the expected maximum level of debt on the path back to its long run target and also shortens the expected adjustment time third the strong responsiveness suggested by a nonlinear fiscal rule is very important to reduce the probability of a solvency crisis however this strength need not be exhibited until debt is high as long as the government has a stronger responsiveness at high levels of debt the responsiveness at low levels of debt has miniscule impact on solvency risk this paper is organized as follows section ii derives the necessary conditions for global stability and the dynamics leading to a solvency crisis under a nonlinear fiscal rule section iii estimates the policy parameters of the canadian fiscal rule and the probability of a solvency crisis section iv provides conclusions ii model we set up a simple small open economy model with a stochastic endowment

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

how does risk management influence production decisions evidence from a field experiment weather is a key source of income risk especially in emerging market economies this paper uses a randomized controlled trial involving indian farmers to study how an innovative rainfall insurance product affects production decisions the authors find that insurance provision induces farmers to invest more in higher return but rainfall sensitive cash crops particularly among educated farmers this shift in behavior occurs ex ante when realized monsoon rainfall is still uncertain the results suggest that financial innovation can mitigate the real effects of uninsured production risk

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

the economics and econometrics of damage control concern for the potentially harmful side effects of agricultural chemical inputs especially pesticides highlights the need to accurately determine the economic levels of their use we consider three model specification issues interaction of direct production inputs with damage control inputs in damage abatement justification for a priori exclusion of production inputs from the abatement function and the motivations and consequences of alternative stochastic specifications empirical analysis using farm level data shows that misspecification of the stochastic element in the production function can overestimate the marginal physical productivity of pesticides and grossly underestimate the responsiveness of demand to increases in pesticide prices

production risk pesticide use and gm crop technology in south africa technology involving genetic modification of crops has the potential to make a contribution to rural poverty reduction in many developing countries thus far pesticide producing bacillus thuringensis bt varieties of cotton have been the main gm crops under cultivation in developing nations several studies have evaluated the farm level performance of bt varieties in comparison to conventional ones by estimating production technology and have mostly found bt technology to be very successful in raising output and or reducing pesticide input however the production risk properties of this technology have not been studied although they are likely to be important to risk averse smallholders this study investigates the output risk aspects of bt technology by estimating two flexible risk production function models allowing technology to independently affect the mean and higher moments of output the first is the popular just pope model and the second is a more general damage control flexible risk mode

time to change what to sow risk preferences and technology adoption decisions of cotton farmers in china this paper examines the role of individual risk attitudes in the decision to adopt a new form of agricultural biotechnology in china i conducted a survey and a field experiment to elicit the risk preferences of chinese farmers who faced the decision of whether to adopt genetically modified bt cotton a decade ago in my analysis i expand the measurement of risk preferences beyond expected utility theory to incorporate prospect theory i find that farmers who are more risk averse or more loss averse adopt bt cotton later farmers who overweight small probabilities adopt bt cotton earlier

input use under crop insurance the role of actual production history the impact of crop insurance on changes in input use has attracted much attention by economists while there are a number of studies on this topic they frame moral hazard in inputs use in a static model however when agricultural producers are forward looking they would make input allocation decisions realizing that their decisions would affect their future actual production history this in turn affects the probability and size of future indemnity payments thus moral hazard should be framed in a dynamic input use decision model we first show theoretically that under certain feasible conditions a static analysis always results in lower optimal input use when compared to a dynamic one with endogenous actual production history this is because static models fail to recognize the role of actual production history we then run numerical simulations using nitrogen application rates as a case study we find that static models indicate significant reduction in nitrogen use compared to the no insurance scenario whereas the dynamic models with a role for actual production history indicate almost no reduction in applied nitrogen the dynamic analysis not only suggests a near absence of moral hazard but for low coverage rates it results in an optimal nitrogen rate higher than that under the no insurance scenario these findings illustrate the importance of recognizing the role of actual production history in mitigating moral hazard possibilities in crop insurance and the dynamic nature of moral hazard in crop insurance

implications of a sugar sweetened beverage ssb tax when substitutions to non beverage items are considered abstract using the 2006 homescan panel we estimate the changes in energy fat and sodium purchases resulting from a tax that increases the price of sugar sweetened beverages ssbs by 20 and the effect of such a tax on body weight in addition to substitutions that may arise with other beverages we account for substitutions between ssbs and 12 major food categories our main findings are that the tax would result in a decrease in store bought energy of 24 3 kcal per day per person which would translate into an average weight loss of 1 6 pounds during the first year and a cumulated weight loss of 2 9 pounds in the long run we do not find evidence of substitution to sugary foods and show that complementary foods could contribute to decreasing energy purchases despite their significantly lower price elasticity the tax has a similar effect on calories for the largest purchasers of ssbs

exchange rate policy under sovereign default risk abstract we examine monetary policy options for a small open economy where sovereign default might occur due to intertemporal insolvency under interest rate policy and floating exchange rates the equilibrium is indetermined under a fixed exchange rate the equilibrium is uniquely determined and independent of sovereign default

differential uncertainties and risk attitudes between conventional and organic producers the case of spanish arable crop farmers the growing importance of economic factors in farmers decision to go organic has raised interest in characterizing the economic behavior of organic versus conventional farms published analyses so far have not considered differential uncertainties and farmers risk preferences between conventional and organic practices when comparing these techniques our article attempts to assess this issue we use a model of farmer decision under risk to analyze the differential values between spanish cop organic and conventional farms and to assess the incentives for adoption of organic practices results show that organic and conventional farms do have different abilities to control production risk as well as different risk preferences organic price premiums and subsidies are found to be powerful instruments to motivate adoption of organic techniques

the fiscal myth of the price level i examine the fiscal theory of the price level according to which non ricardian policy and predetermined nominal government debt fiscally determine prices i argue that the non ricardian policy

ex post moral hazard in prevented planting this article analyzes the existence of moral hazard in prevented planting pp in the united states the pp provision is defined as the failure to plant an insured crop by the final planting date due to adverse events if the farmer decides not to plant a crop the farmer receives a pp indemnity late planting lp is an option for farmers to plant a crop while maintaining crop insurance after the final planting date crop insurance may alter farmers behavior in selecting pp or lp and could increase the likelihood of pp claims even though farmers can choose lp this study finds evidence that a farmer with higher insurance coverage tends to choose pp more often ex post moral hazard spatial panel models attest to the existence of the ex post moral hazard in pp empirically empirical results show that the pp ratio has a positive relationship with insurance coverage in the case of corn production

fiscal imbalances and the dynamics of currency crises abstract this paper analyzes links between the fiscal theory of the price level ftpl and the first generation models after krugman journal of money credit and banking 11 1979 311 325 exploring the idea that a synthesis between the two can become a new framework to analyze the fiscal dimension of currency crises working in a simple synthetic framework we show how external nominal shocks can cause a fiscal imbalance and undermine currency stability resolve two well known paradoxes of the first generation model discuss the role of seigniorage revenues and illustrate how fiscal and interest rate policies interact to determine the magnitude and the timing of speculative attacks and devaluations

the fiscal theory of the price level in an open economy abstract recent work loyo e going international with the fiscal theory of the price level manuscript john f kennedy school of government harvard university 1998 dupor b exchange rates and the fiscal theory of the price level journal of monetary economics 45 613 630 has shown that extension of the fiscal theory of the price level to an open economy yields indeterminate prices and exchange rates calling into question the usefulness of the theory this paper shows that by carefully tailoring policies in an independent fashion governments can eliminate price and exchange rate indeterminacy specifically governments are assumed to care about the welfare of their agents so that they never set policy to yield an intertemporal government budget surplus

an econometric model for the simultaneous estimation of the demand for medical care and the demand for health insurance a first approach abstract in this paper an econometric model is presented in order to disentangle the adverse selection effect people with relatively bad health have a preference for buying health insurance and the health insurance effect on health care expenditures

insurability and moral hazard in agricultural insurance markets pareto optimal and constrained pareto optimal all risk insurance contracts are studied conditions required for emergence of competitive insurance markets are isolated and discussed full insurance contracts are shown to be dominated by contracts involving coinsurance and deductibles if insurers are pseudo risk averse the effect of moral hazard on all risk agricultural insurance indemnity schedules is examined results for indemnity schedules under moral hazard and constant absolute risk aversion show that providing farmers with the incentives to take appropriate actions may imply lower deductibles in the presence of moral hazard than in the absence of moral hazard

pricing weather insurance with a random strike price the ontario ice wine harvest weather insurance within the agricultural sector has been limited by the difficulty in defining the appropriate weather event and in pricing the product we develop a new pricing method for weather insurance under situations where returns depend not only on the occurrence of the weather event but also its timing the method is used to price weather insurance for ice wine because the harvest quantity of grapes for ice wine degrades over time the strike value on the weather event measured as harvestable hours is random we develop a monte carlo method to estimate the premium

a comparison of alternative models for the demand for medical care we have tested alternative models of the demand for medical care using experimental data the estimated response of demand to insurance plan is sensitive to the model used we therefore use a split sample analysis and find that a model that more closely approximates distributional assumptions and uses a nonparametric retransformation factor performs better in terms of mean squared forecast error simpler models are inferior either because they are not robust to outliers e g anova anocova or because they are inconsistent when strong distributional assumptions are violated e g a two parameter box cox transformation

pesticide use environmental spillovers and efficiency a dea risk adjusted efficiency approach applied to dutch arable farming pesticides are widely used by crop producers in developed countries to combat risk associated with pests and diseases however their indiscriminate use can lead to various environmental spillovers that may alter the agricultural production environment thus contributing to production risk this study utilises a data envelopment analysis dea approach to measure performance of arable farms incorporating pesticides environmental spillovers and output variance as undesirable outputs in the efficiency analysis and taking explicitly into account the effect of pesticides and other inputs on production risk the application focuses on panel data from dutch arable farms over the period 2003 2007 a moment approach is used to compute output variance providing empirical representations of the risk increasing or decreasing nature of the used inputs finally shadow values of risk adjusted inputs are computed we find that pesticides are overused in dutch arable farming and there is a considerable evidence of the need for decreasing pesticides environmental spillovers