dynamic corn supply functions a model with explicit optimization both static and dynamic models have been used to estimate aggregate supply elasticities for annual crops the early studies relied on static singleequation models in a few variables assumed static price expectations e g kohls and paarlberg and produced very small estimates of own price supply elasticities e g 0 07 for corn nerlove 1956 1958a and nerlove and addison showed that agricultural supply models incorporating adaptive price expectations and or dynamic resource adjustment produced larger estimates of supply elasticities for corn and other agricultural commodities additionally they showed that supply elasticities obtained from static models need not be bounded by the short run and long run supply elasticities of

competitive storage rational expectations and short run food price determination this paper demonstrates that lags between retail and wholesale food prices can be explained by inventory behavior of retailers theoretical considerations indicate that the markup model should be modified to include a jorgenson type user cost variable which depends on expected future wholesale price the rational expectations hypothesis is used to derive price expectations the retail price specification therefore depends on the stochastic process generating expected wholesale price the econometric methodology employing both causality testing and nonlinear estimation is illustrated by estimating monthly price relationships for beef the results are consistent with the theory and indicate rejection of the markup model

bounded price variation and rational expectations in endogenous switching model of the u s corn market a model that includes bounded price variation and rational expectations by producers is estimated for the u s corn market the resulting model specification is highly nonlinear though since the probability of market equilibrium must be determined endogenously unlike previous research the cross equation restrictions implied by the rational expectations hypothesis are incorporated in the bounded prices model by using fair and taylor s 1983 procedure for obtaining maximum likelihood estimates of nonlinear rational expectations models the resulting model is compared against a standard equilibrium model with naive expectations the results show the bounded prices model is a superior specification copyright 1989 by mit press

land use and economic effects of alternative biofuel policies in brazil and the united states being the two largest ethanol producers in the world biofuel policies in brazil and the united states affect both their domestic markets and the global food and biofuel economy in this article we develop a price endogenous mathematical programming model to simulate and analyze the impacts of biofuel mandates and trade distortions on land use agricultural commodity and transportation fuel markets and global environment we find that an 80 increase in total biofuel production from its 103 billion liter baseline level to the mandated 183 billion liter level in 2022 can be achieved with less than 2 increase in total cropland use in both countries in the united states this would occur with cellulosic biofuels meeting nearly half of the biofuels consumed and produced largely on cropland pasture and corn ethanol meeting the rest of the mandate and resulting in a 2 increase in corn price in brazil the expansion in sugarcane production would be achieved by reducing land under pasture and a marginal increase in intensification of livestock production in the aggregate biofuel policies increase economic surplus in both countries by 1 and redistribute the benefits from agricultural consumers to agricultural producers and the fuel sector finally we also find that full implementation of the mandates in north america china and the european union would reduce the global life cycle global greenhouse gas emissions by about 5

responsiveness of crop yield and acreage to prices and climate we investigate the effect of crop price and climate variables on rainfed corn and soybean yields and acreage in the united states using a large panel dataset for the 1977 2007 period instrumental variables are used to control for endogeneity of prices in yield and acreage regressions while allowing for spatially auto correlated errors we find that an increase in corn price has a statistically significant positive impact on corn yield but the effect of soybean price on soybean yields is not statistically significant the estimated price elasticities of corn yield and acreage are 0 23 and 0 45 respectively of the increase in corn supply caused by an increase in corn price we find that 33 8 is due to price induced yield enhancement and 66 2 is due to price induced acreage expansion we also find that the impact of climate change on corn production ranges from 7 to 41 and on soybean ranges from 8 to 45 depending on the climate change scenarios time horizon and global climate models used to predict climate change we show that the aggregate net impact of omitting price variables is an overestimation of the effect of climate change on corn yield by up to 9 and on soybean yield by up to 15

comparisons and combinations of long and long short strategies market neutral long short strategies get their returns from alphas and short rebates long strategies get their returns from alpha and the market differing return and risk sources complicate their comparison partly because of the strong market referenced focus of conventional performance analysis compelling theoretical advantages of active return per unit of active risk suggest that long short strategies are better able to deliver excess return than are conventional institutional long strategies long short strategies even with tiny positive alphas are seen to improve investors efficient frontiers when added to a traditional t bill long portfolio mix mostly because their risk sources are uncorrelated surprisingly the improvement occurs even if long short strategies are sharpe ratio inferior to long strategies these results provide theoretical support for including long short strategies in most investors mix of assets

the efficiency gains of long short investing long short strategies have generated controversy and institutional interest for more than 10 years we analyzed the efficiency gains of long short investing where we defined efficiency as the information ratio of the implemented strategy the optimal portfolio relative to the intrinsic information ratio of the alphas the efficiency advantage of long short investing arises from the loosening of the surprisingly important long only constraint long short and long only managers need to understand the impact of this significant constraint long short implementations offer the most improvement over long only implementations when the universe of assets is large asset volatility is low and the strategy has high active risk the long only constraint induces biases particularly toward small stocks limits the manager s ability to act on upside information by not allowing short positions that could finance long positions and reduces the efficiency of traditional high risk long only strategies relative t

sectoral implications of farm program modifications the overall and distributional effects of farm programs and selected revisions are examined using a mathematical programming sector model the model incorporates market distortions caused by price supports target prices program participation deficiency payments and marketing loans current farm programs are found to increase producer prices depress consumer prices and in turn result in excess production and higher consumption and exports domestic and foreign consumers as well as domestic producers are subsidized by farm programs social deadweight loss occurs as government payments exceed welfare benefits received by consumers and producers society as a whole benefits from reductions in program provisions

risk averters that love risk marginal risk aversion in comparison to a reference gamble we propose an analytical distinction between standard risk aversion based on the valuation of a single gamble and marginal risk aversion based on the change in valuation between two gambles we measure marginal risk aversion in two dimensions mean and variance data from a field experiment is used to study marginal risk aversion our results suggest that individuals rely on a reference gamble when assessing marginal risk individual responses to marginal changes in mean and variance are nearly identical in direction and magnitude suggesting that information on both standard and marginal risk aversion is needed to accurately model behavior copyright 2008 oxford university press

replacement of agricultural price supports by area payments in the european union and the effects on pesticide use this article determines the contribution of recent european union agricultural policy reforms on the use of pesticides our theoretical model extends the multioutput generalization of the lichtenberg zilberman damage control technology model developed by chambers and lichtenberg our empirical analysis uses farm level data for a sample of french farms results suggest that price effects on the use of pesticides are always more elastic than area payment effects this indicates that policy reforms consisting of a reduction in price supports in favor of area payments may reduce application of crop protection inputs such policy changes which represent a certain degree of decoupling took place under the 1992 common agricultural policy reforms

acreage decisions under risk the case of corn and soybeans an acreage supply response model is developed under expected utility maximization the resulting framework is used to specify and estimate a system of risk responsive acreage equations for corn and soybeans in the united states particular attention is given to the truncation effects of government price supports on the distribution of corn and soybean prices also a wealth variable is included in the acreage equations the empirical results indicate that risk and wealth variables play an important role in cornsoybean acreage decisions the analysis also shows that cross commodity risk reduction is important in acreage allocation decisions

producer surplus and risk this paper examines the welfare economics of producer behavior under risk aversion hicksian marshallian and money equivalent measures are explored it is found that under decreasing absolute risk aversion compensating variation is less than the ordinary marshallian surplus which is less than the money equivalent measure under constant absolute risk aversion all measures coincide finally bounds on compensating and equivalent variations using ordinary producer surplus in a manner analogous to willige approach in consumer theory under certainty are studied similar results hold mutatis mutandis for input demands

what is the cost of a renewable energy based approach to greenhouse gas mitigation energy policies for greenhouse gas ghg mitigation in the united states have set sector specific standards such as the renewable fuel standard rfs and the renewable portfolio standard rps for the transportation and the electricity sectors respectively this paper examines the welfare costs and effectiveness of ghg abatement with these policies and compares them with those under a carbon tax normalized to achieve the same level of abatement over the 2007 2030 period we show that the global welfare cost per ton of ghg abatement with the rfs and rps is 171 while with the carbon tax it is 7

oil price shocks and real gdp growth empirical evidence for some oecd countries this study assesses empirically the effects of oil price shocks on the real economic activity of the main industrialized countries multivariate var analysis is carried out using both linear and non linear models the latter category includes three approaches employed in the literature namely the asymmetric scaled and net specifications evidence of a non linear impact of oil prices on real gdp is found in particular oil price increases are found to have an impact on gdp growth of a larger magnitude than that of oil price declines with the latter being statistically insignificant in most cases among oil importing countries oil price increases are found to have a negative impact on economic activity in all cases but japan moreover the effect of oil shocks on gdp growth differs between the two oil exporting countries in the sample with the uk being negatively affected by an oil price increase and norway benefiting from it

dynamic input demand functions and resource adjustment for us agriculture state evidence abstract the paper presents an econometric model of dynamic agricultural input demand functions that include research based technical change and autoregressive disturbances and fits the model to annual data for a set of state aggregates pooled over 1950 1982 the methodological approach is one of developing a theoretical foundation for a dynamic input demand system and accepting state aggreage behavior as approximated by nonlinear adjustment costs and long term profit maximization although other studies have largely ignored autocorrelation in dynamic input demand systems the results show shorter adjustment lags with autocorrelation than without dynamic input demand own price elasticities for the six input groups are inelastic and the demand functions possess significant cross price and research effects

estimating the environmental impact of land and production decisions with multivariate selection rules and panel data we propose an estimation procedure dealing with multivariate selection and dynamics in land choice and unobserved heterogeneity in structural and crop selection equations the method is applied to a multi output profit function with multiple corner solutions and farm level panel data estimation results reveal that the single selection rule associated with the tobit procedure is rejected in favor of our multivariate selection treatment inconsistent estimates are expected with the tobit procedure or if farmer fixed effects are omitted which can have important consequences for policy recommendations as illustrated in an evaluation of nitrogen runoff elasticities with respect to economic variables copyright 2011 oxford university press

the effect of changing expectations upon stock returns the relationship between heterogeneous expectations on the part of investors with respect to a security s future return and asset prices is an area of increasing interest in finance theoretical examples include miller 14 williams 23 and jarrow 8 empirical examples include bart and masse 1 and peterson and peterson 18 miller bart and masse and peterson and peterson address issues related to whether an increase in divergence of opinion will lead to an increase in an asset s price unfortunately little is known of how different types of changes in investors probability distributions of returns influence asset returns an even more basic problem is that it is not clear what is meant in terms of investor probability distributions when it is said that divergence of opinion increases or decreases the answer to this problem has important implications for understanding equilibrium price

measuring the effect of risk attitude on marketing behavior despite extensive study researchers continue to search for consistent and reliable measures of risk preferences to explain market behavior we find that a measure combining experiments rooted in expected utility theory and measures derived from surveys explains spot and contractual sales but does not exhibit substantially greater explanatory power than its underlying components survey based measures are generally more significant indicators of marketing choices but experimental measures reveal how risk attitudes vary over a range of probable outcomes which is important in light of increased commodity price volatility given recently identified limitations on the applicability of expected utility theory we suggest that researchers include survey methods to obtain low cost supplemental measures

global growing area elasticities of key agricultural crops estimated using dynamic heterogeneous panel methods we estimate the short and long run global response of corn soybeans wheat and rice growing areas to output price changes allowing responses to vary across countries using methods from the panel time series literature our estimates of growing area response are considerably lower than estimates obtained using more traditional models previous findings appear biased due to the assumption of homogeneous response across countries our aggregate estimates of short and long run elasticities of four crop growing areas with respect to average price are 0 024 and 0 143 respectively crop specific results indicate that both corn and soybean growing areas are generally more responsive than wheat and rice for corn and soybeans the long run own price growing area elasticities are 0 274 and 0 793 respectively the long run own price elasticities for wheat and rice are 0 279 and 0 045 respectively the short run own price elasticities for corn and soybeans are 0 133 and 0 199 respectively which are higher than wheat 0 037 and rice 0 00001

how much of commodity price behavior can a rational expectations storage model explain a rational expectations competitive storage model was applied to the u s corn market to assess the aptness of this framework in explaining monthly price behavior in an actual commodity market relative to previous models extensive realism was added to the model in terms of how production activities and storage costs are specified by modeling convenience yield backwardation in prices between crop years did not depend on the unrealistic assumption of zero ending stocks our model generated cash prices that were distributed with positive skewness and kurtosis and mean and variance that increased over the storage season comparable to the persistence and the occasional spikes observed in commodity prices futures prices were generated as conditional expectations of cash prices at contract maturity and the variances of futures prices exhibited realistic time to maturity and seasonal patterns model realizations of cash and futures prices over many years were used to demonstrate the wide variety of price behaviors that could be observed in an efficient market with a similar market structure implying that economic and policy implications drawn from short historical samples of prices could be misleading

multicrop production models with multinomial logit acreage shares the main objective of this paper is to show that the multinomial logit mnl framework can be used for deriving simple acreage share models more specifically we show that mnl acreage choice models can be defined as parts of consistent multicrop models when coupled with suitably designed crop production models e g a specific parameterization of the standard quadratic yield function the parameters of these multicrop models are easily interpreted and estimated although mnl acreage choice models are usually derived by aggregating crop choices defined at the plot level we show that these models can also be derived by considering a profit maximisation problem at the farm level this provides a simple theoretical background for the standard mnl acreage share model as well as for simple extensions of these models the nested mnl acreage share models an empirical application on french farm level data over the period 1996 2007 investigates the empirical performances of the multicrop econometric models based on the proposed mnl framework for modelling acreage choices

exact consumer s surplus and deadweight loss consumer s surplus is a widely used tool in applied welfare economics both economic theorists and cost benefit analysis often use consumer s surplus despite its somewhat dubious reputation the basic idea is to evaluate the value to a consumer or his willingness to pay for a change in price of a good from say pricep to pricep because price changes affect consumer welfare an evaluation of this effect is often a key input to public policy decisions yet consumer s surplus is probably the most controversial of widely used economic concepts both paul samuelson and ian little conclude that the economics profession would be better off without it it is my feeling of the situation that substantial agreement exists on the correct quantities to be measured the amount the consumer would pay or would need to be paid to be just as well off after the price change as he was before the price change the quantities correspond to john hicks compensating variation measures an alternative measure which takes ex post price change utility as the basis of comparison is hicks equivalent variation the controversy arises in the measurement of these quantities the usual measurement procedure is to use the area to the left of the marshallian market demand curve between two price levels jules dupuit originated this measure of welfare change and alfred marshall and hicks derived appropriate conditions for its use the primary condition for the area to the left of the demand curve to correspond to the compensating variation is to have constant marginal utility of income marshall gave this condition and if it holds the same quantity will be derived as the area to the left of the compensated hicksian demand curve this area to the left of the compensated demand curve is exactly what the compensating variation and equivalent variation measure thus the constant marginal utility of income is a sufficient condition for marshallian consumer s surplus to be equal to hicks consumer s surplus in this case arnold harberger s plea to use the welfare triangle as one half times the product of the price change times the quantity change to measure deadweight loss corresponds to the correct theoretical amount of welfare change in a recent paper robert willig derives bounds for the percentage difference between the correct measure of either the compensating or equivalent variation and the marshallian measure derived form the market demand curve his bounds which depend on the income elasticity of demand for the single good in the region of price change being considered as well as the proportion of the consumer s income spent on the good demonstrate that the marshallian consumer s surplus is often a good approximation to hicks consumer s surplus the fact that the proportion of the consumer s income spent matters as well as the income elasticity was first pointed out by harold hotelling willig contends that the approximation error will be less than the errors involved in estimating the demand curve thus he hopes to remove the need for apology that applied economists often need to give to theorists who remark on the inappropriateness of using marshallian consumer s surplus to measure welfare change however in this paper i show that for the case primarily considered by willig of a single price change which is also the situation in which consumer s surplus is often used in applied work no approximation is necessary professor of economics massachusetts institute of technology and research associate national bureau of economic research i would like to thank peter diamond erwin diewert daniel mcfadden robert merton robert solow hal varian joel yellin and the referees for help and comments research support from the national science foundation is acknowledged the reason that we still have two rather than one of samuelson s six measures of consumer s surplus arises from an index number problem of the correct basis for the welfare comparison i will give both measures but plan to concentrate on the compensating variation

a dynamic model of acreage allocation with general and crop specific soil capital we develop an empirically tractable model of acreage allocation decisions in which farmers consider impacts of current crop production 00 future soil productivity because of the soil productivity effects future crop prices are shown to affect current acreage allocations government programs which alter farmers expectations of future crop prices relative to current prices also alter farmers consideration of soil productivity effects of current acreage allocations reduced form and structural versions of our model are shown to yield reasonable parameter estimates

crop insurance acreage decisions and nonpoint source pollution the redirection of farm policy in the 1996 farm bill has generated much interest in seeking environmentally friendly and economically viable ways to protect farm income agricultural insurance has been suggested as such an instrument this article estimates the effect of crop insurance on crop mix and the resulting change in chemical use in the central nebraska basin providing corn insurance will shift land from hay and pasture to corn which will increase chemical use at the extensive margin this extensive margin effect dominates the effect of crop insurance on the application rate leading to an increase in total chemical use

the effects of policy expectations on crop supply with an application to base updating we develop a dynamic model to assess the effects of policy expectations on crop supply and illustrate the approach with estimates of the effects of base updating in u s crop programs for corn and soybeans in the corn belt the effect of base updating is relatively small because relevant crop alternatives are subject to similar policies and the alternatives are substitutes in production increasing acreage of one program crop to capture future payments from base updating reduces future payments from the alternative crop we also use our model to assess the effect of base updating on acreage response to prices

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

supply demand and technology in a multiproduct industry texas field crops the purpose of this paper is to examine the structure of agricultural production for six texas field crops cotton grain sorghum wheat corn rice and hay which account for nearly 95 of recent field crop value specific objectives are to a test the structure of technology to determine i if output and input utilization choices for individual products are independent of production decisions about other outputs and ii if products and or inputs can be consistently aggregated b estimate a coherent set of interrelated supply functions for the six commodities and input demand functions for fertilizer and hired labor because the empirical focus of this paper is specific to one state the results will be of limited value for interpreting specific production relationships elsewhere however the problem is of common interest in production agriculture and the techniques used demonstrate an important application of dual modeling

consumer electricity and gas prices across australian capital cities structural breaks effects of policy reforms and interstate differences abstract we detect and analyze the most significant structural changes in the quarterly growth rate of consumer electricity and gas prices in australia and estimate their corresponding seasonal effects to do so we apply the general modelling framework of the bai perron breaking regression to all available quarterly data for capital cities individually and australia as a whole 1989q3 2017q2 retail energy prices in most australian states were deregulated in the 2000s we find that increases in average quarterly growth rates of electricity and gas prices consistently occurred in the third september quarter and find very few instances of increases in any other quarters of the year in the post deregulation period price increases are significantly higher than in the pre deregulation era results for some capital cities are stark in perth third quarter growth in electricity prices has been five times higher after the structural break in australia as a whole third quarter growth in gas prices has been three times higher after the structural break we discuss several possible explanations for energy price rises in the period since deregulation

crop biodiversity risk management and the implications of agricultural assistance this paper presents a theoretical and empirical analysis of the impact of financial assistance to farms on crop biodiversity in an uncertain setting the findings reveal that risk aversion is an important driving force for crop biodiversity conservation risk averse farmers can hedge against the uncertainty they face by allocating land to different crop species however policies intended to stabilize revenues by supporting particular species may alter this link by delinking crop biodiversity from the management of revenues risk

estimating the supply response of cotton and cereal crops in smallholder production systems recent evidence from mali cotton is one of the most important crops in west africa and is a major catalyst of economic development in rural areas but the sector has suffered from a decline in the world cotton price after 1999 this article exploits an unusual data set following 82 farmers over 14 years from 1994 through 2007 to estimate a nerlovian supply response model for cotton maize sorghum and millet in long term rotation the resulting system of equations is estimated with two stage least squares 2sls showing that this sample of malian cotton producers have responded to prices in a relatively inelastic manner with supply elasticities only about one half of those estimated for producers in developed countries policy reforms could help producers respond more easily to prices changes as well as to raise average productivity levels

do decoupled payments affect u s crop area preliminary evidence from 1997 2000 the federal agriculture improvement and reform fair act of 1996 changed the manner in which the u s government provides direct payments to u s farmers under the fair act producers are eligible for fixed production flexibility contract pfc payments independent of the production of specific crops 1 with a few exceptions 2 supplemental market loss assistance mla payments authorized in subsequent legislation have been made to producers under similar terms i e a producer cannot increase or decrease mla payments by increasing or decreasing production the united states has declared that pfc

welfare impacts of indian apple trade policies in april 2000 india eliminated the quantitative import restriction of apples and instituted a trade barrier in the form of lower ad valorem tariffs this study examines the impacts of indian trade policies on the apple market by reviewing the government policies discussing mathematical and graphical analyses of trade policies presenting estimated equations of demand supply and excess supply and providing solutions of prices quantities and welfare impacts under autarky free trade and tariff regimes given the total population of more than one billion and a vast middle income population and economic reforms and resulting income growth india has a considerable potential to increase its apple consumption our study shows that under free trade india will consume 3008 thousand metric tonnes tmt of apples of which 2237 tmt will be imported also free trade will increase the total welfare by rs 29 512 million these large gains suggest that india should liberalize apple import barriers and move to

producer attitudes toward output price risk experimental evidence from the lab and from the field a number of agricultural and food policy instruments are predicated on the idea that producers dislike output price risk we test experimentally some theoretical predictions about the behavior of producers in the face of output price risk namely sandmo s 1971 prediction that price risk at the extensive margin causes risk averse producers to decrease how much they produce and batra and ullah s 1974 prediction that price risk at the intensive margin causes producers whose preferences exhibit decreasing absolute risk aversion to further decrease how much they produce we do so in labs with us college students as well as in the field with peruvian farmers first as regards price risk at the extensive margin we find no support for sandmo s prediction second consistent with batra and ullah s prediction we find that output decreases in response to price risk at the intensive margin when imposing a linear relationship between output and price risk when relaxing the assumption of linearity between output and price risk however we find a nonmonotonic relationship between output and price risk taken together these results are broadly inconsistent with expected utility theory alternative models of behavior in the face of risk such as prospect theory may explain the behavior we observe

dynamic adjustment in the u s dairy industry a dual model is used to examine the dynamic structure of the u s dairy industry properties implied by the theory of the competitive firm and independent adjustment of two quasi fixed inputs labor and herd size are tested and not rejected instantaneous adjustment however is soundly rejected for each quasi fixed input input adjustment to optimal levels is estimated to take about two years for labor and ten for cows quality adjustments of the labor and cow series do not fully embody the technological change that has occurred in this industry over the study period

cropping activities in agricultural sector models a methodological proposal sector models may be constructed using two fundamentally different approaches first there are the large price endogenous reviewed in mccarl and spreen or cost minimizing reviewed in heady and srivastava sector models hereafter called sm second there are modeling systems which contain a large number of representative farms sharples and schaller walker and dillon or thomson and buckwell hereafter called rfsm the representative farm models not emphasized in this paper consist of many farm models which usually are iteratively solved into an equilibrium bell and hazell present an application in which simultaneous equilibrium is determined on the other hand the sm sector models divide a country into regions each containing aggregate activities and constraints typically these models exhibit a rather poor replication of regional crop mix e g schaller or burton flexibility constraints often are used to correct these deficiencies sahi and craddock sharples and schaller

testing expected utility maximization under price and quantity risk with a heterogeneous panel refutable implications based on the curvature properties of the indirect utility function for the competitive firm operating under uncertainty are extended to the case of both price and quantity uncertainty using unit roots and cointegration tests for heterogeneous panels a model of us agricultural production is developed based on the time series properties of a panel of state level data most refutable hypotheses under output price and output quantity risk are not rejected but symmetry conditions implied by a twice continuously differentiable indirect utility function are rejected the same test conclusions are obtained from a traditional model that presumes stationarity in all variables

crop supply dynamics and the illusion of partial adjustment we use field level data to estimate the response of corn and soybean acreage to price shocks our sample contains more than 8 million observations derived from satellite imagery and includes every cultivated field in iowa illinois and indiana we estimate that aggregate crop acreage responds more to price shocks in the short run than in the long run and we show theoretically how the benefits of crop rotation generate this response pattern in essence farmers who change crops due to a price shock have an incentive to switch back to the previous crop to capture the benefits of crop rotation our result contradicts the long held belief that agricultural supply responds gradually to price shocks through partial adjustment we would not have obtained this result had we used county level panel data standard econometric methods applied to county level data produce estimates consistent with partial adjustment we show that this apparent partial adjustment is illusory and we demonstrate how it arises from the fact that fields in the same county are more similar to each other than to fields in other counties this result underscores the importance of using models with appropriate micro foundations and cautions against inferring micro level rigidities from inertia in aggregate panel data our preferred estimate of the own price long run elasticity of corn acreage is 0 29 and the cross price elasticity is 0 22 the corresponding elasticities for soybean acreage are 0 26 and 0 33 our estimated short run elasticities are 37 larger than their long run counterparts

methods of estimation for models of markets with bounded price variation introduction there has been a considerable amount of literature on the estimation of models which are in disequilibrium see fair and jaffe 1972 fair and kelejian 1974 amemiya 1974 maddala and nelson 1974 goldfeld and quandt 1975 laffont and garcia 1977 bowden 1978 etc the main feature of these models is that there is a demand function a supply function a min condition and in some models a price adjustment equation the cornerstone equation in these models is q1 min d1 s where d t quantity demanded at time t s t quantity supplied at time t q t quantity transacted at time t this equation which says that the short side of the market always prevails separates the sample points into those belonging to demand and those belonging to supply one can classify the models into two categories those with sample separation known and those with sample separation unknown but the important point is that the min condition implies under the usual assumptions that the probability of equilibrium is zero for any t however there are many practical cases where some of the observations refer to equilibrium points and some to disequilibrium points this is because trading in many markets is confined to some limits on price and the disequilibrium occurs only when these limits are violated there are minimum wage laws in labor markets usury laws in credit markets and trading limits in commodity markets in all such cases the markets are sometimes in equilibrium and sometimes in disequilibrium the present paper discusses methods of estimation for models of such markets

consensus expectations and international equity returns numerous studies of u s markets have shown that stock selection models have been able to isolate securities that earn returns above those predicted by a simple market model models examining the relation between analyst expectations and returns have been particularly useful unexpected earnings changes in analysts earnings per share forecasts the number of analysts revising their forecasts all these measures have been found to be useful in predicting abnormal returns in u s equity markets at least two of these measures changes in analysts eps forecasts and the number of analysts changing their forecasts are also related to abnormal returns in several international markets

a market equilibrium analysis of the impact of risk on the u s rice industry an economic model of supply demand for u s rice suggests that increases in risk result in decreased acreage and increased marketing margins in a market equilibrium context the empirical results also suggest rice production and rice prices are more responsive to changes in risk faced by marketing firms than changes in risk faced by producing firms

implicit prices of soil characteristics for farmland in iowa arguments have long persisted that purchasers pay too much for poor land i e less productive more erosive relative to the higher quality counterpart in other words purchasers are either irrational or poorly informed relative to the differences in land productivity between poor and good farmland similar arguments have been advanced concerning the willingness to pay rent on the part of tenant operators little empirical evidence exists to support or reject this hypothesis farmland appraisals are sometimes cited as evidence to support the contention but such empiricism may indicate more about the quality and biases of appraisers than about the behavior or efficient functioning of the farmland market resolution of this issue is extremely important to the formation of soil conservation policy designed to protect soil productivity irrational behavior on the part of land purchasers may lead one to infer that the market system is failing to recognize adequately the soil productivity consequences of soil erosion if this oversight consistently leads to excessive soil erosion from society s perspective then some form of government intervention may be necessary to protect the welfare of society assuming that such intervention is capable of correcting the market failure

multiple input multiple output production choices and technology in the u s wheat region duality theory motivates a translog expected profit function consistent with multiple products price uncertainty preseason climate constraints acreage control policies and possibly nonhomothetic technology although multiple outputs are allowed enterprise specific data is not necessary instead time series measures of output revenues and expected prices input expenses and prices and fixed input flows are employed appropriate measures of elasticities of choice returns to size and biases in technological change are derived results indicated decreasing returns to size rather limited though complementary responsiveness of choices to price changes and the nature of biases in technological changes

research needs and challenges in the few system coupling economic models with agronomic hydrologic and bioenergy models for sustainable food energy and water systems on october 12 13 a workshop funded by the national science foundation was held at iowa state university in ames iowa with a goal of identifying research needs related to coupled economic and biophysical models within the few system approximately 80 people attended the workshop with about half representing the social sciences primarily economics and the rest from the physical and natural sciences the focus and attendees were chosen so that findings would be particularly relevant to sbe research needs while taking into account the critical connectivity needed between social sciences and other disciplines we have identified several major gaps in existing scientific knowledge that present substantial impediments to understanding the few system we especially recommend research in these areas as a priority for future funding 1 economic models of decision making in coupled systems deliberate human activity has been the dominant factor driving environmental and land use changes for hundreds of years while economists have made great strides in modeling and understanding these choices the coupled systems modeling literature with some important exceptions has not reflected these contributions several paths forward seem fruitful first baseline economic models that assume rationality can be used much more widely than they are currently moreover the current generation of iams that include rational agents have emphasized partial equilibrium studies appropriate for smaller systems to allow this approach to be used to study larger systems the potential for and consequences of general equilibrium effects should be studied as well second it is important to address shortcomings in these models of economic decision making valuable improvements could be gained from developing coupled models that draw insights from behavioral economics many decision makers deviate systematically from actions that would be predicted by strict rationality but very few iams incorporate this behavior potentially leading to inaccurate predictions about the effects of policies and regulations improved models of human adaptation and induced technological change can also be incorporated into coupled models particularly for medium to long run models decisions about adaptation and technological change will have substantial effects on the conclusions and policy implications but more compelling methods for incorporating these changes into modeling are sorely needed in addition some economic decisions are intrinsically dynamic yet few coupled models explicitly incorporate dynamic models economic models that address uncertainty in decision making are also underutilized in coupled models of the few system 2 coupling models across disciplines despite much recent progress established models for one component of the few system often cannot currently produce outcomes that can be used as inputs for models of other components this misalignment makes integrated modeling difficult and is especially apparent in linking models of natural phenomena with models of economic decision making economic agents typically act to maximize a form of utility or welfare that is not directly linked to physical processes and they typically require probabilistic forecasts as an input to their decision making that many models in the natural sciences cannot directly produce we believe that an especially promising approach is the development of bridge models that convert outputs from one model into inputs for another such models can be viewed as application specific reduced form distillations of a richer and more realistic underlying model ideally these bridge models would be developed in collaborative research projects involving economists statisticians and disciplinary specialists and would contribute to improved understanding in the scientific discipline as well 3 model validation and comparison there is little clarity on how models should be evaluated and compared to each other both within individual disciplines and as components of larger iams this challenge makes larger integrated modeling exercises extremely difficult some potential ways to advance are by developing statistical criteria that measure model performance along the dimensions suitable for inclusion in an iam as well as infrastructure and procedures to facilitate model comparisons focusing on the models out of sample distributional forecasting performance as well as that of the iam overall is especially promising and of particular importance moreover applications of iams tend to estimate the effect of hypothetical future policy actions but there have been very few studies that have used these models to estimate the effect of past policy actions these exercises should be encouraged they offer a well understood test bed for the iams and also contribute to fundamental scientific knowledge through better understanding of the episode in question the retrospective nature of this form of analysis also presents the opportunity to combine reduced form estimation strategies with the iams as an additional method of validation

risk aversion and yield uncertainty in duality models of production a mean variance approach a duality model of production is developed that endogenizes stochastic output decisions under risk aversion the model incorporates both yield and price uncertainty and nonlinear mean variance risk preferences this permits modeling of the firm s expected output supply and input demand decisions under risk and also in principle the firm s output variance decisions the duality model is tractable for empirical research

phasing out of environmentally harmful subsidies consequences of the 2003 cap reform abstract subsidies linked to production have been classified as environmentally harmful by the oecd a core element of the eu 2003 common agricultural policy cap reform is to decouple income support from production this paper estimates the environmental consequences of this policy reform an agricultural sector model using a modified version of the positive mathematical programming method depicts the complex natural structural and political relationships of austrian farming changes in management measures can be analyzed with respect to their environmental effects by using appropriate indicators simulation results show that the 2003 cap reform will reduce the average cost of production and may improve environmental conditions regarding soil water and greenhouse gases when compared to a scenario without reform thus the new cap is likely to bring about outcomes which the previous reform agenda 2000 promised but did not deliver

impacts of ethanol on planted acreage in market equilibrium the magnitude of land conversion caused by biofuels expansion largely determines whether biofuels reduce net greenhouse gas emissions to examine this issue we model how equilibrium changes in input use and land allocation decisions respond to market and policy induced increases in corn ethanol demand we demonstrate why total cropland area unambiguously increases with increased ethanol demand the impact of ethanol price subsidies and consumption mandates are examined in the context of technical change if ethanol demand is elastic enough an exogenous increase in corn yields leads to cropland expansion with price subsidies yield increases under consumption mandates reduce land use copyright 2010 oxford university press

biofuels and land use change sugarcane and soybean acreage response in brazil scientists and economists are increasingly worried that biofuels production is leading to land use changes in the form of competition with food crops or loss of natural ecosystems i estimate acreage conversion in response to shocks in sugarcane a biofuels feedstock and soybean thought to be affected by united states corn ethanol production prices in brazil at a national and regional level using county level data from 1973 to 2005 i consider a dynamic panel data model of input demand for agricultural land conditioning on price changes of other commodities the short run crop price elasticity of sugarcane acreage in brazil is estimated to be approximately zero whereas the elasticity of soybean acreage is 0 9 when both spot and futures prices change the regional estimates for soybeans show considerable variation and are highest in areas of ecological importance such as the cerrado sugarcane estimates are more homogeneous these results should be taken into account in impact assessments of biofuels

futures prices in supply analysis are instrumental variables necessary citation nathan p hendricks joseph p janzen aaron smith futures prices in supply analysis are instrumental variables necessary american journal of agricultural economics volume 97 issue 1 1 january 2015 pages 22 39 https doi org 10 1093 ajae aau062

kram a sector model of danish agriculture background and framework development this paper outlines a new spatial nonlinear programming model of the agricultural sector in denmark the kram model kvl s rationalized agricultural model optimizes production functions on a very disaggregated level allowing for analysis of changes in physical constraints to production as well as price changes the model is dynamic with a time horizon of 10 years the structural development is determined endogenously using profits and a markov chain model the purpose of this paper is to place kram in a theoretical framework future work will address the programming calibration and application of kram

the structure of u s agricultural technology 1910 78 this paper utilizes 1910 78 time series data and a single product aggregate translog profit function to measure the structure of u s agricultural technology duality relations are used to devise a multifactor measure of biased technical change a measure of nonhomotheticity is introduced which indicates the effects scale change has had on aggregate cost shares the empirical analysis finds that different nonhomothetic technologies characterized the prewar and postwar periods differing technical change biases are consistent with relative price trends during the two periods showing that the long run structure of u s agricultural technology has been consistent with the hayami ruttan induced innovation theory

on the optimality of long short strategies we consider the optimality of portfolios not subject to short selling constraints and derive conditions that a universe of securities must satisfy for an optimal active portfolio to be dollar neutr

consumer welfare effects of increased food and energy prices in this study the authors evaluated how much price changes in food and energy two basic living expenditures competing for consumers budgets would affect consumer welfare we first estimated a us complete demand system to quantify the interdependent demand relationships among 11 categories of consumption expenditures among the estimates the own price elasticities of both food and energy are relatively inelastic a finding that explains the dynamics of the recent soaring food and energy prices the estimated demand elasticities were then incorporated into the measurement of hicksian compensating variation to analyse the consumer welfare effects of price changes in food and energy the results indicated that an increase in food and energy prices would increase compensated expenditures or incur a substantial consumer welfare loss creating an especially heavy burden for low income households

cost functions under production uncertainty we characterize the cost functions which would be consistent with expected utility maximization when production is uncertain it is not generally possible assuming risk aversion to use only expected output as the constraint in a cost minimization problem in some leading cases cost functions consistent with expected utility maximization are particularly useful because they are devoid of risk preferences

20 myths about long short popular conceptions of long short investing are distorted by a number of myths many of which appear to result from viewing long short from a conventional investment perspective long short portfolios differ fundamentally from long only portfolios in construction in the measurement of their risk and return and in their implementation costs furthermore long short portfolios allow greater flexibility in security selection asset allocation and overall plan structure

estimating supply response in the presence of farm programs previous empirical research on crop supply response has given insufficient attention to the fundamentally different nature of supply response under farm programs versus competitive markets a simple theoretical model is presented which highlights the program participation option in the farmer s acreage allocation decision the model also provides the basis for different expected supply elasticities under free market and farm program regimes for corn and soybeans econometric supply estimation for corn belt states for 1948 80 using a temporally disaggregated approach confirms a greater supply elasticity for corn and a lower supply elasticity for soybeans under acreage restricting feed grain programs

modeling agricultural supply response using mathematical programming and crop mixes mathematical programming models are widely used in agricultural sector analysis however the lack of micro level data as well as computational requirements necessitate the aggregation of individual producers into representative units when working at the sectoral level this usually leads to unrealistic extreme specialization in supply responses in 1982 mccarl introduced the historical crop mixes approach to avoid extreme specialization we extend this approach by generating additional synthetic crop mixes using supply response elasticities and systematically varied commodity prices in addition to avoiding extreme specialization this approach provides flexibility when future supply responses can be vastly different from past responses an application to u s biofuel policy analysis is presented

the economic consequences of substituting carbon payments for crop subsidies in u s agriculture there is a growing body of literature on the costs of sequestering carbon however no studies have examined the interplay between farm commodity programs and carbon sequestration programs this study investigates two dimensions of the interaction between farm commodity programs and afforestation programs using a price endogenous sector model of agriculture in the united states first this study compares the fiscal and welfare costs of achieving specific carbon targets through afforestation with and without current farm programs second it examines the welfare fiscal and carbon consequences of replacing existing farm subsidies wholly or in part with payments for carbon two approaches hicksian and marshallian are investigated in the first the sector model is used to quantify the carbon consequences and fiscal costs associated with various combinations of farm commodity and carbon sequestration programs that leave consumers and producers in the u s agricultural sector no worse off than under existing farm programs the second approach focuses on the carbon and welfare consequences of various farm commodity and carbon sequestration programs that hold total program fiscal costs constant at current levels althouth the methodology and data are applied to the united states the issues addressed are common in a number of developed nations particularly within the european union eu adapting existing sector models in these nations to perform similar analyses would provide policy makers with more precise information about the nature of the trade offs involved with second best policies for replacing farm commodity subsidies with tree planting subsidies

extensification of agriculture and deforestation empirical evidence from sudan extensification of agriculture is one of the major factors contributing to the destruction of forests in africa in sudan such horizontal expansion comes at the expense of land devoted to trees and other vegetation thereby inducing conditions that are inimical to sustainable agricultural production different factors have contributed to extensification although high economic returns from crop mainly sorghum production was an important factor encouraging extensification of rainfed mechanized farming other factors outside agriculture have also contributed to that expansion this paper uses data from eastern sudan and an acreage response model to identify the most important factors influencing acreage expansion different measures and forms of risk were used in the acreage response model the paper shows how policies in the energy sector can indirectly influence acreage expansion in the agricultural sector

the dynamics of agriculture supply a reconsideration this paper presents a dynamic rational expectations equilibrium model for a given crop the dynamic supply equation is derived from the farmer optimization problem and the equilibrium movements of commodity price production and land allocations are solved analytically it is shown that the observed dynamics of agriculture supply which are usually explained and measured with the nerlovian supply response model can be explained and measured at least as well by the rational expectations equilibrium model however interpretation of the results is different and the paper defines explicitly the dynamic supply elasticities and presents an econometric method for consistent estimators for the parameters

renewable energy policies and competition for biomass implications for land use food prices and processing industry abstract we use a mathematical programming model to examine the impacts of simultaneous implementation of two us biofuel and bioenergy policies on commodity markets and spatial distribution of future cellulosic biorefineries the key findings based on our numerical simulation are 1 the number and average annual production capacity of cellulosic biofuel refineries depend on the total renewable fuels mandate 2 the mix of cellulosic biomass feedstock depends on the assumptions about the production costs of energy crops and the amount of cropland that can be used for energy crops but regardless of the assumptions crop residues are the primary biomass source to meet the demand for biomass for biofuel production and electricity generation and 3 the biomass production areas would surround either future cellulosic biorefineries or the existing coal based power plants to reduce the costs of biomass transportation these findings have important implications for biorefinery investors and provide valuable policy insights for the selection of biomass crop assistance program project areas

supply response to countercyclical payments and base acre updating under uncertainty an experimental study we design an experiment to simulate how people make agricultural production decisions under three policy scenarios each incorporating direct payments dps a price uncertainty without countercyclical payments ccps b price uncertainty with ccps and c price uncertainty ccps and uncertainty regarding base acreage updating results are the ccp program and perceived possibility of future base updating created incentives for subjects to invest more in program base crops despite payments being decoupled from current production decisions those choosing to reduce revenue risk by increasing plantings of base crops may face reduced incomes suggesting the efficiency of crop markets may be diminished

technology as an agricultural pollution control policy in this paper we consider the market level impacts of factor augmenting innovations designed to reduce the use of fertilizers and pesticides first within the context of a simple two factor model and then through a simulation model of the u s corn market in both models the impacts depend on the output demand elasticity and input substitution elasticities the principal conclusion of the simulation analysis is that the potential for new techniques to reduce the use of agricultural chemicals is limited capital augmenting innovations would actually raise fertilizer and pesticide usage land augmenting innovations would also tend to increase pesticide usage

allocatable fixed inputs and two stage aggregation models of multioutput production decisions allocation decisions for a fixed input such as land are incorporated into a two stage aggregation model of multioutput production decisions the resulting two stage model is more realistic and is as tractable for empirical research as the standard model

uniform and non uniform second best input taxes we investigate second best input based taxes foragricultural nonpoint pollution control when marketprices are endogenous and production isheterogeneous theoretically we derive the optimalforms of taxes which take account of heterogeneity non uniform taxes and a tax which does not auniform tax empirically we use a multi factor market equilibrium simulation model to determineoptimal tax rates and associated equity effects particularly differences in landowner gains lossesacross a heterogeneous region when market prices areendogenous second best tax policies result inpecuniary externalities that affect existingenvironmental externalities in particular thepecuniary externalities amplify the effect of producerheterogeneity on determination of sub regionaldifferences in tax rates and returns to land particularly for the uniform policy with endogenousprices the uniform tax rate is considerably higherthan any of the non uniform rates and ironically thenon uniform taxes result in less dispersion oflandowner gains across sub regions than the uniformtax

the impact of decoupled payments on farm choices conceptual and methodological challenges abstract in this paper we review the methodological framework for analysing decoupled payments in models of agricultural production market and technological uncertainty farm efficiency credit constraints farm household choices involving extra agricultural decisions policy uncertainty and long run impact of decoupling on investment and land values are the relevant issues that should be pursued by methodological and empirical analysis future research should refine the analysis of decoupled payments mainly trying to provide results that can be useful for policy simulation to bridge the gap between analysis at the individual level and sector policy models

investment in u s agriculture resource adjustment problems in u s agriculture are motivated against the background of the farm problem the adjustment cost hypothesis is invoked to specify and estimate consistently a system of dynamic investment demand and output supply equations by utilizing recent advances in dynamic duality theory the investment demand equations assume the form of a multivariate flexible accelerator results indicate that labor capital services and land exhibited quasi fixity while intermediate materials were a variable factor this can be construed as a form of asset fixity within aggregate u s agriculture the univariate flexible accelerator hypothesis is rejected

constrained choices under risk there has recently been a revival of interest in the implications of rationing for economic theory extending the work of samuelson 21 tobin and houthakker 24 and pollak 16 recent papers by bruno 3 howard 8 latham 13 and neary and roberts 15 have explored the theory of producer and consumer behavior under quantity rationing these developments have provided useful hypotheses in the investigation of economic behavior for example they have stimulated a reexamination of macroeconomic disequilibrium however previous work seems to have focused on economic models in the absence of uncertainty yet given that production decisions are often made before output prices are known and in the absence of complete contingent markets sandmo 22 batra and ullah 2 and others have developed the theory of the competitive firm under price uncertainty under the expected utility maximization hypothesis such a theory provides useful information about the influence of changing economic conditions or of risk behavior on production decisions but because of the presence of short run adjustment costs leading to short run input fixity or because of regulatory or institutional constraints quantity rationing often influences production decisions in order to evaluate how rationing influences such decisions there is a need to develop a conceptual model of constrained choices of the firm under risk the objective of this paper is to explore the implications of quantity rationing in the context of production theory under price uncertainty by introducing risk and risk behavior it extends the classical analysis of quantity constrained production decisions 3 21 the implications of quantity constraints for risk responsive choice functions are derived using the concepts of compensated choice functions and virtual prices it is shown that expected price effects can be decomposed into substitution effects and wealth effects the substitution effects measure the effects of a change in expected price on the compensated choice functions the compensation being made through a change in initial wealth holding expected utility constant the wealth effects characterize risk preferences since a non zero wealth effect reflects a departure from an arrow pratt constant absolute risk aversion utility function the influence of rationing on the properties of ordinary as well as compensated choice functions is analyzed in details by deriving the implications of quantity constraints for firm behavior under uncertainty the paper presents a number of useful results concerning the influence of risk or technology on economic behavior under rationing for example a