Jennifer S. James

The Economic Returns to U.S. Public Agricultural Research

Julian M. Alston et al. — Tue, 06 Mar 2012 14:50:50 PST

We use newly constructed state-specific data to explore the implications of common modeling choices for measures of research returns. Our results indicate that state-to-state spillover effects are important, that the research and development lag is longer than many studies have allowed, and that misspecification can give rise to significant biases. Across states, the average of the own-state benefit-cost ratios is 21:1, or 32:1 when the spillover benefits to other states are included. These ratios correspond to real internal rates of return of 9 or 10 per annum, much smaller than those typically reported in the literature, partly because we have corrected for a methodological flaw in computing rates of return.

Structural Changes in U.S. Agricultural Production and Productivity

Jennifer S. James et al. — Tue, 25 May 2010 13:31:45 PDT

The structure of U.S. agricultural production changed dramatically during the 20th Century. Major technological innovations transformed the relationship between agricultural inputs and outputs, and contributed to rapid increases in agricultural productivity. However, evidence is mounting that suggests we have entered a new era, with substantially lower rates of productivity growth. In this article, we examine trends and spatial patterns in agricultural input use, production of outputs, and productivity. We focus on productivity growth over the period 1949–2002, and find a statistically significant slowdown in productivity growth after 1990.

Agricultural R&D Policy: A Tragedy of the International Commons

Jennifer S. James et al. — Tue, 25 May 2010 13:31:44 PDT

Over the past 50 years public agricultural research has contributed enormously to humanity, enabling the supply of food to grow faster than demand in spite of a rapidly growing population, income growth, and shrinking natural resources. Nonetheless, in many countries we see waning public support for agricultural R&D, especially in Africa, a diversion of research resources from farm productivity towards other agendas, and early warning signs of a slowdown in agricultural productivity. The world has continued to collectively underinvest in agricultural R&D because of domestic and international market failures associated with appropriability problems. Governments have failed to effectively address these problems, often doing too little, too late. This tragedy of the international commons may be getting worse. In the past, developing countries benefited considerably from technological spillovers from developed countries, but because of changes occurring in developed countries, spillovers from developed countries may not be available to developing countries in the same ways or to the same extent . In this article, the factors contributing to persistent global underinvestment in agricultural R&D are described from a developing country perspective, estimates of agricultural R&D spending trends are presented, and incentive mechanisms for increasing rates of investment in agricultural R&D are described and assessed.

Grading Error Reduces Grower Incentive to Increase Prune Quality

Jennifer S. James et al. — Tue, 25 May 2010 13:31:44 PDT

Grading is important to ensure the production of high-quality foods, but It Is usually done with error, distorting market signals and diminishing Incentives to produce high-quality products. Size is the main quality criterion for dried prunes and the crucial characteristic In determining prune value. We studied the economic effects of errors In commodity grading, focusing In particular on the Implications of one-way (asymmetric) grading errors, namely when small, low quality product Is erroneously classified as high quality, but not vice versa. In an application to the California prune Industry, we estimated the extent to which large prunes are undervalued and small prunes are overvalued. We conclude that grading error means that prunes graded as high-quality may not really be high-quality prunes. The presence of these Incorrectly graded prunes depresses the prices that growers are paid for high-quality prunes and increases the net returns for small prunes. As a result, growers face reduced incentives to produce larger prunes.

The Economics of Agricultural R&D

Julian M. Alston et al. — Tue, 25 May 2010 13:31:43 PDT

Agricultural research has transformed agriculture and in doing so contributed to the transformation of economies. Economic issues arise because agricultural research is subject to various market failures, because the resulting innovations and technological changes have important economic consequences for net income and its distribution, and because the consequences are difficult to discern and attribute. Economists have developed models and measures of the economic consequences of agricultural R&D and related policies in contributions that relate to a very broad literature ranging across production economics, development economics, industrial organization, economic history, welfare economics, political economy, econometrics, and so on. A key general finding is that the social rate of return to investments in agricultural R&D has been generally high. Specific findings differ depending on methods and modeling assumptions, particularly assumptions concerning the research lag distribution, the nature of the research-induced technological change, and the nature of the markets for the affected commodities.

Taxes and Quality: A Market-Level Analysis

Jennifer S. James et al. — Tue, 25 May 2010 13:31:43 PDT

A conventional assumption of product homogeneity when the commodity of interest is actually heterogeneous will lead to errors in an analysis of the incidence of policies, such as taxes. In this article, an equilibrium displacement model is used to derive analytical solutions for price, quantity, and quality effects of ad valorem and per unit taxes. The results show how parameters determine the effects of tax policies on quality. The potential for tax-induced distortions in quality, and the distributive consequences of those distortions, are illustrated in a case study of the market for Australian wine.

Pennsylvanians' Knowledge of Agriculture

Fern K. Willits et al. — Tue, 25 May 2010 13:31:42 PDT

In 2005, researchers at Pennsylvania State University surveyed 1,521 Pennsylvanians in 65 counties to determine their knowledge of and perceptions about agriculture in the state. The study looked to: assess the level of agricultural knowledge of Pennsylvanians; ascertain how personal characteristics and frequency of rural visitation related to agricultural knowledge and to the perceptions of citizens about various agricultural issues; explore the relationship of agricultural knowledge to public perceptions of selected agricultural issues; and suggest how information on Pennsylvanians’ knowledge, experiences, and perceptions of agriculture are relevant to policy makers.

The study results showed that, overall, most participants believed they knew very little about the impacts of agriculture on the state, farming production practices, or agriculture and the environment. Their self-rating on matters related to food and nutrition was somewhat higher, but even here a substantial majority believed they were not well-informed. When asked to respond to factual questions dealing with the different knowledge areas, many participants failed to answer correctly, and even those who did select the right answer were seldom certain of their responses. For some questions, respondents who thought their answers were correct often provided the wrong answers. Many of the answers reflected misperceptions about agriculture and its impact on the state.

The survey analysis showed that direct personal contact with farming and visiting rural areas were clearly the most important experiences associated with higher levels of agricultural knowledge. The findings also showed that people who have greater agricultural knowledge differ in their views and actions from those with less understanding of agriculture, and this, coupled with the low levels of knowledge found in the population studied, suggests that it is important that efforts be made to educate the public about the nature and impacts of agriculture.

To educate the public, the researchers recommended maintaining, and possibly expanding, Agriculture in the Classroom programs that provide agricultural education to school children; developing and expanding programs that allow people to visit working farms in the state; intensifying programs to enhance agricultural tourism and rural visitation; and developing a periodical directed to the general population, which features articles on Pennsylvania farming, agritourism, farm facts and historical notes, and agricultural research findings.

Asymmetric Grading Error and Adverse Selection: Lemons in the California Prune Industry

Jennifer S. James et al. — Tue, 25 May 2010 13:31:42 PDT

Grading systems are often introduced to address the classic adverse selection problem associated with asymmetric information about product quality. However, grades are rarely measured perfectly, and adverse selection outcomes may persist due to grading error. We study the effects of errors in grading, focusing on asymmetric grading errors-namely when low-quality product can erroneously be classified as high quality, but not vice versa. In a conceptual model, we show the effects of asymmetric grading errors on returns to producers. Application to the California prune industry shows that grading errors reduce incentives to produce more valuable, larger prunes.

Science, Technology and Skills

Philip Pardey et al. — Tue, 25 May 2010 13:31:41 PDT

The invention of agriculture that occurred around 10,000 years ago heralded a shift from nomadic hunting and gathering to more managed forms of food, feed and fibre production. The domestication of crops initially involved the saving of seed from one season for planting in subsequent years. Later, farmers purposefully selected crop varieties and so in practice began matching and, by repeated selection over many years, adapting crop genetics to the environment in which the crop was grown. From its inception, enhancing G x E (i.e., gene by environment) interactions was an intrinsic, if not defining, feature of agriculture.

U.S. Agricultural Productivity and Returns to Research

Jennifer S. James et al. — Tue, 25 May 2010 13:31:41 PDT

Bargaining Rationale For Cooperative Generic Advertising

Jennifer S. James — Tue, 25 May 2010 13:31:40 PDT

The beggar-thy-neighbour aspect of commodity advertising means that benefits to one commodity from advertising come at the expense of other commodities. The effect can be mitigated by cooperation among groups as shown by Alston, Freebairn and James (AFJ). A drawback to AFJ’s analysis is that some cooperative outcomes require side payments from one producer group to another. This paper offers a bargaining solution as an alternative to cooperation in the case where cooperative side payments would be needed. We show that while bargaining without side payments is not as effective as cooperation at reducing beggar-thy-neighbour effects, it is a welfare improving alternative to non-cooperation and is likely more practical in many situations.

Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs

Jennifer S. James et al. — Tue, 25 May 2010 13:31:40 PDT

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups, and a scenario where they optimize independently. In an illustrative example using 1998 data for U.S. beef and pork, the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum.

Levy-Funded Research Choices by Producers and Society

Jennifer S. James et al. — Tue, 25 May 2010 13:31:39 PDT

Commodity levies are used increasingly to fund producer collective goods such as research and promotion. In the present paper we examine theoretical relationships between producer and national benefits from levy-funded research, and consider the implications for the appropriate rates of matching government grants, applied with a view to achieving a closer match between producer and national interests. In many cases the producer and national optima coincide. First, regardless of the form of the supply shift, when product demand is perfectly elastic, or all the product is exported, domestic benefits and costs of levy-funded research all go to producers and they have appropriate incentives. Second, if research causes a parallel supply shift, the producer share of research benefits is the same as their share of costs of a levy, and their incentives are compatible with national interests. In such cases, a matching grant would cause an over-investment in research from a national perspective. However, if demand is less than perfectly elastic, and research causes a pivotal supply shift, the producer share of benefits is smaller than their share of costs of the levy, and they will under-invest in research from a national point of view. A matching grant can be justified in such cases, however the magnitude of the optimal grant is sensitive to market conditions.

The Incidence of Agricultural Policy

Julian M. Alston et al. — Tue, 25 May 2010 13:31:39 PDT

This chapter first discusses what economists mean by "the incidence of agricultural policy" and why we care about it. Then it reviews models of the determinants of the differential incidence of different policies among interest groups such as suppliers of factors of production, consumers, middlemen, taxpayers, and others. Results are represented in terms of Marshallian economic surplus, and surplus transformation curves. After reviewing the results from standard models under restrictive assumptions, certain assumptions are relaxed in order to analyze the effects of imperfect supply controls, variability, cheating and imperfect enforcement of policies, and the dynamics of supply.

Setting Agricultural Science Strategy in Tumultuous Economic Times

Jennifer S. James et al. — Tue, 25 May 2010 13:31:38 PDT

The international competitiveness and prosperity of U.S. agriculture depends on steady and rapid productivity growth fueled by public agricultural research and development (R&D). Agricultural science benefits consumers and the environment, not just farmers. Enhanced productivity as a result of agricultural R&D means that consumers have access to a more abundant, cheaper, safer, higher quality, and more diverse and convenient food supply, produced with less stress on natural resources and the environment. From a global perspective, productivity growth allows agricultural production to increase faster than demand; food has become much cheaper over time in spite of a rapidly growing world population with rising per capita incomes. In the future, continuing productivity growth will be necessary to meet the challenges of ever-increasing demand for food along with mounting pressures on the natural resource base, exacerbated by new demands for biofuels crops.

Consumer Knowledge and Acceptance of Agricultural Biotechnology Vary

Jennifer S. James — Tue, 25 May 2010 13:31:38 PDT

Results from consumer surveys reveal some basic conclusions about consumer attitudes toward agricultural biotechnology. First, consumers do not agree about whether biotech foods are good or bad. Second, a small group of people strongly opposes them. Third, the majority of consumers are uninformed about the technology and how food is produced. Relatively small but vocal anti-biotechnology activist groups are successful at influencing public opinion because of consumers’ lack of knowledge, creating a role for universities and government agencies to provide clear, objective and accessible information.