Agricultural supply chains under government interventions [electronic resource]

This dissertation studies operational and policy-making problems that arise in agricultural supply chains. In the first two chapters, we explore the role of government interventions in poverty alleviation and promotion of sustainable production, respectively. In the third chapter, we investigate farmers' land allocation decisions in the face of a diversification option. Chapter 1 is motivated by the policy makers' efforts in alleviating poverty and maintaining food security by supporting poor farmers in developing countries. We investigate the effectiveness of three types of interventions, price support, cost support and yield enhancement efforts, as well as different policy implementation methods such as announcing the total budget or the unit support, in terms of their impact on farmers' incomes, consumer surplus, and return on government spending. We show that price and cost support interventions are equivalent if the total budget is public information. On the other hand, if the government announces the unit support, the benefit to different stakeholders along the agricultural supply chain depends on the market distortion created by the intervention. Specifically, in this case, price support results in greater distortion, benefiting consumers more than cost support whereas the converse holds for farmers. Furthermore, we find that under yield enhancing efforts, farmers may incur losses due to the interplay of several market and crop characteristics. Lastly, we show that interventions cannot always generate positive return from the government's perspective. Chapter 2 explores the role of policy instruments in promoting sustainable practices in agricultural production. We investigate the effectiveness of a number of policy instruments, i.e., taxes and subsidies, in terms of their impact on adoption of sustainable practices, producers' profits, consumer surplus and return on government spending. Our findings indicate that while using only taxes encourages the adoption of sustainable production, social welfare decreases as a result. Utilizing only subsidies outperforms policies that involve both taxes and subsidies in achieving higher social welfare but the converse is true in achieving a higher adoption rate. We show that zero-expenditure policies result in a decline in social welfare unless producers face financial constraints in making the costly transition to sustainable practices. Finally, we conduct a numerical study using data on conventional and organic egg production in Denmark and make policy recommendations in order to achieve the target adoption rate set by the Danish government. Chapter 3 investigates farmers' production decisions when facing different crop options. We investigate the value of crop diversification for farmers and the impact of this flexibility on the supply chain. Our results indicate that farmers' land allocation decisions depend on the total farm space (capacity) available and that diversification may not be the equilibrium outcome if the capacity is low. We find that as the profitability gap between the alternative crops increases, monoculture outweighs diversification for higher capacity values. When diversification is the equilibrium outcome, yield variability of both crops adversely affects farmers and the supply chain. On the other hand, buyers are better off when the alternative crop has high yield variability. In fact, buyers may benefit from an increase in the yield variability of the crop they buy if farmers are incentivized to limit the production of the alternative crop in order to extract the maximum revenue from the market.

Keywords: Business.
Advisor: Bimpikis Kostas primary advisor. Thesis advisor
Lee Hau Leung primary advisor. Thesis advisor
Wein Lawrence advisor. Thesis advisor