Handbook of Agricultural Economics, Volume V2B: Agricultural and Food Policy

606 Pages·2007·9.53 MB·English

by  Bruce L. Gardner

INTRODUCTION TO THE SERIES
The aim of the Handbooks in Economics series is to produce Handbooks for various
branches of economics, each of which is a definitive source, reference, and teaching
supplement for use by professional researchers and advanced graduate students. Each
Handbook provides self-contained surveys of the current state of a branch of economics
in the formo f chapters prepared by leading specialists on various aspects of this branch
of economics. These surveys summarize not only received results but also newer devel-
opments, from recent journal articles and discussion papers. Some original material is
also included, but the main goal is to provide comprehensive and accessible surveys.
The Handbooks are intended to provide not only useful reference volumes for profes-
sional collections but also possible supplementary readings for advanced courses for
graduate students in economics.
KENNETH J. ARROW and MICHAEL D. INTRILIGATOR
PUBLISHER' S NOTE
For a complete overview of the Handbooks in Economics Series, please refer to the
listing at the end of this volume.
CONTENTS OF THE HANDBOOK
VOLUME 1A
PART - 1 AGRICULTURAL PRODUCTION
retpahC 1
Production and Supply
YAIR MUNDLAK
retpahC 2
Uncertainty, Risk Aversion, and Risk Management for AgriculturalP roducers
GIANCARLO MOSCHINI and DAVID A. HENNESSY
retpahC 3
Expectations, Information and Dynamics
MARC NERLOVE and DAVID A. BESSLER
retpahC 4
The Agricultural Innovation Process: Research and Technology Adoption in a Changing Agricultural Sector
DAVID SUNDING and DAVID ZILBERMAN
retpahC 5
Structural Change in Agricultural Production: Economics, Technology and Policy
JEAN-PAUL CHAVAS
retpahC 6
Land Institutions and Land Markets
KLAUS DEININGER and GERSHON FEDER
retpahC 7
Human Capital: Education and Agriculture
WALLACE E. HUFFMAN
retpahC 8
Women's Roles in the Agricultural Household: Bargaining and Human Capital Investments
T. PAUL SCHULTZ
retpahC 9
Human Capital: Migration and Rural Population Change
J. EDWARD TAYLOR and PHILIP L. MARTIN
retpahC 01
Agricultural Finance: Credit, Credit Constraints, and Consequences
PETER J. BARRY and LINDON J. ROBISON
vii
viii Contents of the Handbook
Chapter 11
Economic Impacts of Agricultural Research and Extension
ROBERT E. EVENSON
Chapter 12
The Agricultural Producer: Theory and Statistical Measurement
RICHARD E. JUST and RULON D. POPE
VOLUME 1B
PART 2 - MARKETING, DISTRIBUTION AND CONSUMERS
Chapter 13
Commodity Futures and Options
JEFFREY C. WILLIAMS
Chapter 14
Storage and Price Stabilization
BRIAN WRIGHT
Chapter 15
Food Processing and Distribution: An Industrial Organization Approach
RICHARD J. SEXTON and NATHALIE LAVOIE
Chapter 16
Marketing Margins: Empirical Analysis
MICHAEL K. WOHLGENANT
Chapter 17
Spatial Price Analysis
PAUL L. FACKLER and BARRY K. GOODWIN
Chapter 18
Duality fort he Household: Theory and Applications
JEFFREY T. LaFRANCE
Chapter 19
Economic Analysis of Food Safety
JOHN M. ANTLE
Chapter 20
Marketing and Distribution: Theory and Statistical Measurement
JAMES VERCAMMEN and ANDREW SCHMITZ
Chapter 21
Production and Marketing
RACHAEL E. GOODHUE and GORDON C. RAUSSER
Contents of the Handbook ix
VOLUME 2A
PART 3 - AGRICULTURE, NATURAL RESOURCES AND THE ENVIRONMENT
Chapter 22
The Economics of Agriculture in Developing Countries: The Role of thEen vironment
RAMON LOPEZ
Chapter 23
Agriculture and the Environment
ERIK LICHTENBERG
Chapter 24
Common-Pool Resourceasn d Institutions: Toward a Revised Theory
ELINOR OSTROM
Chapter 25
Agriculture and Ecosystem Services
GEOFFREY M. HEAL and ARTHUR A. SMALL
PART 4 - AGRICULTURE IN THE MACROECONOMY
Chapter 26
Applied General Equilibrium Analysis of Agricultural and Resource Policies
THOMAS W. HERTEL
Chapter 27
Agriculture antdh e Macroeconomy, with Emphasis on Developing Countries
MAURICE SCHIFF and ALBERTO S~IDLAV
Chapter 28
The Macroeconomics of Agriculture
PIER GIORGIO ARDENI and JOHN FREEBAIRN
Chapter 29
Agriculture anEdc onomic Development
C. PETER TIMMER
Chapter 30
The Rural Sector in Transition Economies
KAREN BROOKS and JOHN NASH
Chapter 31
Rural Development and Rural Policy
ALAIN DE JANVRY, ELISABETH SADOULET and RINKU MURGAI
Chapter 32
Agriculture in the Macroeconomy: Theorayn d Measurement
PHILIP ABBOTT and ALEX McCALLA
x Contents of the Handbook
VOLUME 2B
PART 5 - AGRICULTURAL AND FOOD POLICY
Chapter 33
The Incidence of Agricultural Policy
JULIAN M. ALSTON and JENNIFER S. JAMES
Chapter 34
Information, Incentives, and the Design of Agricultural Policies
ROBERT G. CHAMBERS
Chapter 35
Market Failures and Second-Best Analysis with a Focus on Nutrition, Credit, and Incomplete Markets
ROBERT INNES
Chapter 36
Political Economy of Agricultural Policy
HARRY DE GORTER and JOHAN SWINNEN
Chapter 37
A Synthesis of Agricultural Trade Economics
LARRY S. KARP and JEFFREY M. PERLOFF
Chapter 38
International Trade Policy and Negotiations
DANIEL A. SUMNER and STEFAN TANGERMANN
Chapter 39
Public Policy: Its Many Analytical Dimensions
GORDON C. RAUSSER and RACHAEL E. GOODHUE
Chapter 40
Food Security and Food Assistance Programs
CHRISTOPHER B. BARRETT
Chapter 41
Food Security and the World Food Situation
R.C. DUNCAN
Chapter 42
Policy-Related Developments in Agricultural Economics: Synthesis of Handbook Volume 2
BRUCE L. GARDNER and D. GALE JOHNSON
INTRODUCTION
The subject matter of agricultural economics has both broadened and deepened in re-
cent years, and the chapters of this Handbook present the most exciting and innovative
work being done today. The field originated early in the twentieth century with a focus
on farm management and commodity markets, but has since moved far into analysis
of issues in food, resources, international trade, and linkages between agriculture and
the rest of the economy. In the process agricultural economists have been pioneering
users of developments in economic theory and econometrics. Moreover, in the process
of intense focus on problems of economic science that are central to agriculture - mar-
ket expectations, behavior under uncertainty, multimarket relationships for both prod-
ucts and factors, the economics of research and technology adoption, and public goods
and property issues associated with issues like nonpoint pollution and innovations in
biotechnology - agricultural economists have developed methods of empirical investi-
gation that haveb een taken up in other fields.
The chapters are organized into five parts, contained in two volumes. Volume 1 con-
tains Part ,1 "Agricultural Production", and Part 2, "Marketing, Distribution and Con-
sumers". These two parts include much of the traditional scope of agricultural eco-
nomics, emphasizing advances in both theory and empirical application of recent years.
Volume 2 consists of three parts: "Agriculture, Natural Resources and the Environment",
"Agriculture in the Macroeconomy", and "Agricultural and Food Policy". Although
agricultural economists have always paid attention to these topics, research devoted
to them has increased substantially in scope as well as depth in recent years.
A large-scale effort to review and assess the state of knowledge in agricultural eco-
nomics was previously undertaken by the American Agricultural Economics Associ-
ation (AAEA), with publication in four volumes from 1977 to 1992.1 Those earlier
survey volumes have strikingly different subject-matter content from that of the present
Handbook, especially considering that they described the same field only 20 years ago.
The AAEA volumes have extensive coverage off arm management issues, costs of pro-
duction in agriculture, and estimates of efficiency of marketing firms. In our judgment
little in any fundamental way has been added to our knowledge in these areas, and
applications have become routine rather than imaginative research. The largest AAEA
volume was devoted entirely to agriculture in economic development. This remains a
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ix
iix Introduction
most important topic, but we cover it in only one complete chapter and parts of sev-
eral others. This reflects in part the integration of work on developing countries with
mainstream applied work. For example, our chapters on production economics, expec-
tations, and risk management also encompass applications to agriculture in developing
economies.
That integration points to another gradual but notable change in agricultural econo-
mists' research. The AAEA surveys had most of the chapters of one volume devoted
to quantitative methods. We do not have any separate methodological chapters. In con-
trast, we have several chapters with substantial development of economic theory. This
reflects an evolution in the research priorities of leading agricultural economists who,
following the earlier work of Nerlove on supply and Griliches on technological change,
are working at the theoretical frontiers and simultaneously undertaking empirical work
- not just purveying new theories to their more "applied" colleagues.
As its title indicates, the AAEA volumes were surveys of literature, and aimed at
completeness of coverage within their subject matter. We asked our authors to be se-
lective, to focus on what they saw as the main contributions to the area they covered,
and to assess the state of knowledge and what remains to be learned. This approach
has left some gaps in our coverage, and has given us some chapters that are perhaps
more idiosyncratic than is usual for a survey chapter. In order to pull things together at
a higher level of aggregation, we commissioned five "synthesis" chapters, one for each
of the five parts of the Handbook. And, to provide our own even broader overview, the
editors have written closing syntheses of each volume. Because these syntheses provide
capsule summaries of each Handbook chapter, we will not present further description
of content here.
Although advances in research in agricultural economics are increasinglyb eing made
in many countries, our authors and coverage of applied topics is heavily U.S.-weighted
(only six authors work outside of the U.S.: two in Europe, two in Australia, one in
Canada, and one in Israel). Of those in the U.S., however, six are economists at the
World Bank, an international rather than American institution. Probably in another
twenty years or so one will have to become more international to capture the most
interesting and exciting developments in the field, but that day has not arrived yet.
Among the many debts we have accrued in the preparation of this Handbook, the most
important was Rachael Goodhue. She not only assessed the substance ofm any chapters,
but she persuaded many reviewers and authors alike to complete their assigned respon-
sibilities. Other critical contributors include the dedicated staff who provided support at
the University of California, Berkeley, and at the University of Maryland. At Maryland,
Liesl Koch served as copy editor and guided the authors' final revisions and preparation
of the manuscript with sure judgment and a firmb ut diplomatic hand, a job best likened
to driving a herd of cats. Coordination of correspondence with authors and reviewers
was organized and carried out at Berkeley with exemplary efficiency and organizational
skill by Jef Samp, Jessica Berkson, and Jennifer Michael, under the direction of Nancy
Lewis.
Introduction iiix
eW also want to recognize the comments dam suggestions received from 54 review-
ers of chapter drafts: Julian Alston, Jock Anderson, Richard Barichello, Eran Beinen-
baum, Michael Boehlje, Dan Bromley, Steve Buccola, Allan Buckwell, David Bul-
lock, Michael Caputo, Jean-Paul Chavas, John Connor, Klaus Deininger, Jeffrey Doff-
man, Marcel Fafchamps, Gershon Feder, Joe Glauber, Dan Gilligan, Rachael Goodhue,
Tom Grennes, Zvi Griliches, Geoff Heal, Eithan Hochman, Matt Holt, Wallace Huff-
man, .D Gale Johnson, Zvi Lerman, Erik Lichtenberg, Ethan Ligon, Alan Love, Jill
McCluskey, Mario Miranda, Arie Oskam, Dick Perrin, Mark Rosegrant, Vern Ruttan,
Ed Schuh, Kathleen Segerson, Larry Sjaastad, Spiro Stefanou, Jo Swinnen, Frans van
der Zee, Finis Abner Welch, Womack, Jacob and Yaron.
BRUCE GARDNER
GORDON RAUSSER
Chapter 33
THE INCIDENCE OF AGRICULTURAL POLICY
JULIAN M. ALSTON
Department of Agricultural and Resource Economics, University of California, Davis
JENNIFER S. JAMES
Department of Agricultural Economics and Rural Sociology, Pennsylvania The State University
Contents
Abstract 1690
Keywords 1690
.1 Introduction 1691
2. Single-market models of policy incidence in commodity markets 1693
2.1. The basic model 1693
2.2. Efficient redistribution 1695
2.2.1. Redistribution using an output quota 1696
2.2.2. RedisUSbution using a subsidy 1698
2.2.3. Comparing quotas and subsidies 1698
2.3. Multiple instruments 1699
2.4. The marginal social opportunity cost of funds 1700
2.4.1. Implications of 3 > 0 1701
3. Implications of international trade for incidence 1702
3.1. Market power in trade 1703
3.2. Output quotas for traded goods 1704
3.3. Comparing subsidies on output versus exports 1705
3.4. Price discrimination and pooling schemes 1706
4. Multimarket models 1707
4.1. Aggregation of goods and welfare 1708
4.2. Two factors with fixed factor proportions 1711
4.3. Two factors with variable factor proportions 1714
4.3.1. Equations of the model 1715
4.3.2. Output subsidy 1717
4.3.3. Input subsidy 1718
4.3.4. Quotas on output or an input 1719
4.3.5. Combining insmmaents 1720
5. Supply controls - some extensions to the analysis 1721
Handbook of Agricultural Economics, Volume ,2 Edited by B. Gardner and .G Rausser
© 2002 Elsevier Science B.V. All rights reserved