Three Essays on the Political Economy of Live Stock Sector in Turkey

182 Pages·2014·0.8 MB·English

by  Hasan Tekguc

University of Massachusets Amherst
THREE ESSAYS ON THE POLITICAL ECONOMY OF LIVESTOCK SECTOR
IN TURKEY

A Dissertation Presented

by

HASAN TEKGÜÇ

Submitted to the Graduate School of the
University of Massachusetts Amherst in partial fulfillment
of the requirements for the degree of

DOCTOR OF PHILOSOPHY

May 2010

Department of Economics
© Copyright by Hasan Tekgüç 2010

All Rights Reserved
TITLE OF THESIS OR DISSERTATION: THREE ESSAYS ON THE
POLITICAL ECONOMY OF LIVESTOCK SECTOR IN TURKEY

A Dissertation Presented

by

HASAN TEKGÜÇ

Approved as to style and content by:

_______________________________________
James K. Boyce, Chair

_______________________________________
Mwangi wa Gĩthĩnji, Member

_______________________________________
Bernard J. Morzuch, Outside Member

____________________________________
Gerald Epstein, Department Head

Department of Economics
DEDICATION

To my loving parents, brother and all other relatives and friends for their unwavering
support and patience
ACKNOWLEDGMENTS

I used to look down on beggars. Partly, I thought they were lazy and partly, I was
irritated by their poverty. I definitely did not understand what it means to be down on
your luck. In the process of my research, On the one hand, I hope I gained a better
understanding of causes of poverty. On the other hand, I surely learnt nothing about being
down on your luck. On the contrary, in this moment of reflection I realize that I am a
truly lucky person. I never really wanted to be anything but a scholar, and I am among
the very few who are lucky enough to pursue their dream. I am blessed with a caring and
loving family that has supported me in whatever pursuit I choose to. I was never
hampered by any kind of financial, health or familial obligations in pursuing my dream.
I am also very lucky that back in the day some radicals put effort and time to
create and sustain the UMass Amherst Economics Department. I don’t think I would even
have passed comprehensive exams in most other economics departments. I will forever
be grateful to Burak Bener for helping me to find about and apply to UMass. Until then, I
didn’t even know that there were alternatives to what we were taught in the
undergraduate. Once at UMass, I immediately feel at home – not the family home in
Cyprus but the comradeship of fellow graduate students. The comradeship and the
support system within Egso are peerless in the academia.
I really enjoyed most of my classes. I sure did my share of complaining but more
like Napoleon’s grumbling soldiers; I never really have any serious second thoughts
about why I was here. In my second semester, I took the development economics class
with Jim Boyce and I immediately knew my area of specialization and advisor. I always
have a special interest in developments issues in general and agricultural and
v
environment in particular; but from Jim I learn how to approach all the problems that
bother us in a systematic way. Also, Jim has allowed me to pursue the topics I am most
interested. From time-to-time, I did second guess the wisdom of letting graduate students
to wander freely instead of giving them a clearly defined research project. At the end
though, I am pleased with the result.
I am also very grateful that I met Bernie Morzuch at UMass. I surely benefited
from his classes and advising but the most I cherish is his contagious enthusiasm for
empirical research. I guess I always liked to look at tables and figures but his enthusiasm
has encouraged me to delve into econometric research. Naturally, I am also very grateful
to Mwangi wa Gĩthĩnji for his direction and counsel. He looked the other way when I
used his research assistantship to write the first draft of my prospectus. My general
attitude to agrarian questions is also shaped by his class on the political economy of
agrarian change.
Sung-Ha Hwang and Değer Eryar have read and commented on the first drafts of
Chapters 2 and 3. Moreover, they have acted as my informal advisors. Gül Ünal and
Bengi Akbulut also commented on an early draft of Chapter 2. Emir Benli read and
edited various sections at various stages. I am also very grateful to Dr. Cuma Akbay who
has helped me to understand and then replicate their work on estimation of LA/AIDS
model for Turkey. Finally, I want to thank Turkish Statistical Institute which allowed me
to use 2003 Household Budget Survey and especially Özlem Sarıca who has patiently
answered my questions about preparation of Household Budget Survey and calculation of
the poverty line for Turkey.
vi
THREE ESSAYS ON THE POLITICAL ECONOMY OF LIVESTOCK SECTOR
IN TURKEY

MAY, 2010

HASAN TEKGÜÇ, B.A., BOGAZICI UNIVERSITY

M.A., UNIVERSITY OF MASSACHUSETTS AMHERST

Ph.D., UNIVERSITY OF MASSACHUSETTS AMHERST

Directed by: Professor James K. Boyce

ABSTRACT
My dissertation consists of three empirical essays where I analyze animal products
consumption and marketing. First using cross-sectional household data, I investigate the
importance of consumption from home produce (self-provisioning) and conclude that
studying food consumption decisions in isolation from production is not warranted for
Turkey. I develop a testing procedure incorporated into linear approximation of the
almost ideal demand system (LA/AIDS) model to formally test the relevance of food
self-provisioning. Studying consumption in isolation from production leads significant
overestimation of rural households’ responsiveness to price and income signals especially
for the dairy and egg products. Second I investigate the contribution of consumption from
home produce to alleviate vulnerability to undernutrition in rural areas. I find that the
level, depth and severity of food poverty to be least among rural households who engage
in food self-provisioning and food self-provisioning reduce vulnerability to
undernutrition. Moreover, food self-provisioning is concentrated in expensive calories
from vegetables and dairy so self-provisioning rural households also have a more
balanced diet. Finally I investigate whether milk processing firms abuse their oligopsony
vii
power to excessively profit themselves to the expense of milk farmers and final
consumers. I look for evidence whether the speed of adjustment of processed milk price
is same when farm-gate milk prices increase and decrease. I find no evidence that will
point out any price gauging on the part of milk processors to benefit themselves. Actually
I detect a long-term downward trend in processed milk prices coinciding with new major
entries to milk processing industry.

viii
TABLE OF CONTENTS

ACKNOWLEDGMENTS ...............................................................................................v
ABSTRACT..................................................................................................................vii
LIST OF TABLES ........................................................................................................xii
LIST OF FIGURES......................................................................................................xiv
LIST OF ABBREVIATIONS........................................................................................xv
CHAPTER
1. INTRODUCTION.......................................................................................................1
2. TESTING SEPARATION OF CONSUMPTION AND PRODUCTION DECISIONS
OF FOOD........................................................................................................................9
2.1 Introduction....................................................................................................9
2.2 Theoretical Framework and Hypothesis Testing Strategy .............................12

2.2.1 Agricultural Household Models .....................................................12
2.2.2 Test of Separability........................................................................15

2.3 Empirical Model ..........................................................................................17

2.3.1 Linearly Approximated Almost Ideal Demand System
(LA/AIDS) .......................................................................................18
2.3.2 Estimating a complete demand system with censored variable
problems...........................................................................................19
2.4 Self-provisioning..........................................................................................22
2.5 Empirical Results .........................................................................................25

2.5.1 Estimation of the Model.................................................................25
2.5.2 Testing Separability .......................................................................28

2.6 Economic and Policy Significance................................................................30

2.6.1 Estimation in the Presence of Nonseparability................................30
ix