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Annual Review of Resource Economics - Volume 10, 2018
Volume 10, 2018
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The Personal Journey of a Resource Economist
Vol. 10 (2018), pp. 1–18More LessThis perspective article begins with speculation about my early interest in conservation at age six and traces my personal development until I became an assistant professor. My contribution to the beginning and development of nonmarket valuation, including an early publication on the stated preference method, is included. All but one of the discussed articles was about a nonmarket context. I also explore my research on endangered species in general and the spotted owl and black rhinoceros in particular. The arc of interest represented in my publications embraces biodiversity. For example, one article covers a metapopulation model, whereas others discuss the bio-economics of antibiotics and an early treatment of uncertainty in a public utility setting. My reconsideration of the analytical and empirical resource scarcity literature in the field is distinctive, while the necessity to work in an interdisciplinary setting is shown as transparent.
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Opportunities and Challenges for Big Data in Agricultural and Environmental Analysis
Vol. 10 (2018), pp. 19–37More LessAgriculture stands on the cusp of a digital revolution, and the same technologies that created the Internet and are transforming medicine are now being applied in our farms and on our fields. Overall, this digital agricultural revolution is being driven by the low cost of collecting data on everything from soil conditions to animal health and crop development along with weather station data and data collected by drones and satellites. The promise of these technologies is more food, produced on less land, with fewer inputs and a smaller environmental footprint. At present, however, barriers to realizing this potential include a lack of ability to aggregate and interpret data in such a way that it results in useful decision support tools for farmers and the need to train farmers in how to use new tools. This article reviews the state of the literature on the promise and barriers to realizing the potential for Big Data to revolutionize agriculture.
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Organic Agriculture, Food Security, and the Environment
Vol. 10 (2018), pp. 39–63More LessOrganic agriculture is often perceived as more sustainable than conventional farming. We review the literature on this topic from a global perspective. In terms of environmental and climate change effects, organic farming is less polluting than conventional farming when measured per unit of land but not when measured per unit of output. Organic farming, which currently accounts for only 1% of global agricultural land, is lower yielding on average. Due to higher knowledge requirements, observed yield gaps might further increase if a larger number of farmers would switch to organic practices. Widespread upscaling of organic agriculture would cause additional loss of natural habitats and also entail output price increases, making food less affordable for poor consumers in developing countries. Organic farming is not the paradigm for sustainable agriculture and food security, but smart combinations of organic and conventional methods could contribute toward sustainable productivity increases in global agriculture.
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Separating Myth from Reality: An Analysis of Socially Acceptable Credence Attributes
Vol. 10 (2018), pp. 65–82More LessThere has been increasing interest in food characteristics that are broadly classified here as socially acceptable credence attributes. This review considers several demand-side issues associated with the economic analysis of these attributes. First, despite ample research and media discussion suggesting strong preference for these food attributes, market shares remain low. Hypothetical bias and social desirability bias likely play a prominent role in explaining this disconnect. There has also been an increase in government and food industry regulation aimed at socially acceptable credence attributes, and this article considers why public votes and policy positions appear discordant with retail shopping behavior. One set of policy proposals involves more information disclosure related to such attributes; however, the welfare economics associated with information provision is not straightforward. While much has been learned about consumers’ stated willingness-to-pay for socially acceptable credence attributes, this review suggests that more research is needed to understand the current environment surrounding these food characteristics.
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Information, Incentives, and Government Intervention for Food Safety
Vol. 10 (2018), pp. 83–103More LessFoodborne illnesses are an important health issue throughout the world. Food safety incidents cause significant economic losses in a multitude of ways, including discomfort, pain, loss in productivity, and death. This review examines issues in the economics of food safety. We first discuss the analysis of costs and benefits of food safety intervention and their usefulness in guiding policy making, and then look into the information problems that dampen the market incentives for the provision of food safety. Building on this discussion, we examine how a government can intervene in food safety either through direct intervention or by increasing the incentives for firms to supply safe food and then look briefly into private initiatives in food safety. We conclude by inviting new research that exploits new estimation techniques and newly available data.
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Global Alcohol Markets: Evolving Consumption Patterns, Regulations, and Industrial Organizations
Vol. 10 (2018), pp. 105–132More LessFor millennia, alcoholic drinks have played an important role in food security and health (both positive and negative), but consumption patterns of beer, wine, and spirits have altered substantially over the past two centuries. So too have their production technologies and industrial organization. Globalization and economic growth have contributed to considerable convergence in national alcohol consumption patterns. The industrial revolution contributed to excess consumption by stimulating demand and lowering the cost of alcohol. It also led to concentration in some alcohol industries, especially brewing. In recent years, the emergence of craft producers has countered firm concentration and the homogenization of alcoholic beverages. Meanwhile, governments have intervened extensively in alcohol markets to reduce excessive consumption, raise taxes, protect domestic industries, and/or ensure competition. These regulations have contributed to, and been affected by, the evolving patterns of consumption and changing structures of alcohol industries.
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Globalization of Agriculture
Vol. 10 (2018), pp. 133–160More LessThe world's agrifood systems have been transformed by a process of globalization in which ever-closer functional integration of the world's economies has occurred, supported by the Internet, the rise of transnational corporations, and the removal of many barriers to trade and investment. This review outlines the key characteristics of globalization and then details the changes occurring to agriculture and the broader agrifood system. It addresses the worldwide spread of productivist, specialized, industrial-style farming methods and their consequences, both positive and negative. The review focuses on three key issues: the world's capability to produce enough food to feed humankind; the important roles played in shaping globalization by transnational corporations, global finance, and government policies; and the emerging challenges to globalization. The first of these addresses the current debate regarding whether it is possible to maintain ecological diversity while producing sufficient food to feed the world. The other issue acknowledges that outcomes of global processes are spatially uneven and strongly contested by forms of agriculture antithetical to the homogenized, capitalist, neoliberal model associated with globalization.
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Twenty-First-Century Trade Agreements and the Owl of Minerva
Vol. 10 (2018), pp. 161–183More LessThe post-Second World War liberal trade order has been a driver of global economic growth and rising average per capita incomes. This order confronts increasing opposition, reflecting concerns about adjustment costs and distributional effects of globalization and the ability to pursue national policy goals. At the same time, the development of complex production relations distributed across many countries calls for cooperation on a variety of regulatory policies. Contrary to what is argued by opponents of globalization, this does not imply one-size-fits-all rules that constitute a threat to national sovereignty and democratic legitimation. There remains an important traditional integration agenda that centers on rule making by major trading powers on policies that generate negative international spillovers. But the core challenge for the political economy of twenty-first-century trade agreements is to support regulatory cooperation to better govern international production and address the nonpecuniary externalities associated with greater economic integration.
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Adoption of Labor-Saving Technologies in Agriculture
Vol. 10 (2018), pp. 185–206More LessLabor-saving technologies in agriculture have been fundamental to the advancement of the agricultural industry, and in general, the economies of nations. This article presents a review of several economic theories that form the basis of the economics of labor-saving technologies, including the theory of induced innovation and subsequent theories developed from it. The review also includes empirical application studies and classifies existing literature into ex ante and ex post analyses of technology adoption. It also presents a thorough review of economic studies on the most successful labor-saving technology adoptions in agriculture, including crops and livestock. Finally, we discuss the future of labor-saving technologies in agriculture and their implications for new societal and economic structures.
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Are Cattle Markets the Last Frontier? Vertical Coordination in Animal-Based Procurement Markets
Vol. 10 (2018), pp. 207–227More LessVertical integration and contracting have been documented as important developments in enhancing the efficiency of supply chains in agriculture. Despite the efficiency gains, movement toward greater integration remains controversial. Meanwhile, the diffusion of these alternative procurement mechanisms has been heterogeneous over time and across commodities. In this review we compare and contrast the livestock and poultry industries in the United States to provide insights into the future of integration and coordination throughout the beef cattle supply chain. While similarities exist across livestock and poultry industries, there are significant differences that placed the beef industry on a different trajectory, with a variety of structural and biological factors that have limited the industry's progression toward greater integration.
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Increasing Concentration in the Agricultural Supply Chain: Implications for Market Power and Sector Performance
Vol. 10 (2018), pp. 229–251More LessIncreasing consolidation and vertical coordination in the food chain have made the prospect of market power abuses by powerful food manufacturers and retailers an issue and a policy concern worldwide, in terms of potential impacts on farmer and consumer welfare and sector efficiency. We address the extent to which traditional wisdom and standard conceptual and empirical models that have girded thought about market power in the food chain for decades apply in modern food-market contexts and examine recent work on competition in the food chain to gauge the most promising paths forward. A key conclusion is that considerations that go beyond the bounds of standard models likely cause market power to be less than would be predicted based on the highly concentrated structures of many modern agricultural and food markets. These considerations include downstream buyers who rationally internalize long-run implications of their pricing decisions to farmers, powerful food manufacturers and retailers who countervail each other's market power, and the complex pricing decisions of multistore and multiproduct food retailers.
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Marketing as a Risk Management Mechanism with Applications in Agriculture, Resources, and Food Management
Vol. 10 (2018), pp. 253–277More LessMarketing tools, in addition to their role in persuasion and serving as a bridge between production and consumers, reduce prepurchase risks. This role has received less attention in the literature. This review highlights marketing's role in reducing consumers’ purchasing risk. We present our approach, backed up with extensive literature review, beginning with a description of advertising, branding, and pricing that may serve as a signal of a product's quality. We then describe and analyze the role of product demonstrations, free product samples, and money-back guarantees (MBGs), which enable consumers to acquire direct experience before a final decision is made, in reducing risks. We briefly discuss product warranties and their relationship to MBGs. We demonstrate how marketing tools can help reduce the risk associated with the consumption of food products that contain genetically modified organisms, as well as help in marketing of agricultural products that vary in their levels of risk to buyers.
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The Impact of Gender Inequality on Economic Performance in Developing Countries
Vol. 10 (2018), pp. 279–298More LessDespite substantial progress, gender gaps persist in many developing countries. Since the 1990s, a literature has emerged arguing that these gaps not only are inequitable but also reduce economic performance. This review finds that, first, it is methodologically difficult to determine reliable effects of gender gaps on economic performance. Second, accounting studies that calculate how much larger GDP would be if gender gaps in employment disappeared vastly overestimate likely effects. Third, the theoretical literature has generated important insights on mechanisms linking gender gaps to economic performance. Fourth, systematic reviews of the cross-country evidence robustly show that lowering gender gaps in education leads to higher economic performance, while the literature on the impact of other gaps is much more limited. Fifth, there is accumulating micro evidence on how reducing particular gender gaps at the level of households, farms, or firms can improve economic performance in particular contexts, with robust results in some areas, and less clear evidence in others.
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An Assessment of Experimental Evidence on Agricultural Technology Adoption in Developing Countries
Vol. 10 (2018), pp. 299–316More LessThis article reviews recent results on technology adoption in developing countries, primarily from field experiments. It focuses on studies that highlight three constraints to adoption: credit, insurance, and information. Interventions supplying credit are consistently effective in spurring technology adoption for a minority of farmers, while interventions supplying insurance have had more mixed results. This review suggests that one mitigating factor on demand for both of these products is incomplete information, which adds additional uninsurable risk to the technology adoption decision. A broad group of studies identify the presence of strong informational frictions. The review concludes with some potential directions for future research.
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The Historical Evolution of Alternative Metrics for Developing Countries’ Food and Agriculture Policy Assessment
Vol. 10 (2018), pp. 317–334More LessThe demand for quantitative assessments of the impacts of food and agricultural policies has grown steadily in the past four decades. From the application of social cost-benefit analysis to investments in developing countries in the 1970s to the use of increasingly sophisticated general equilibrium models today, the menu of available techniques for policy assessment has expanded rapidly. In addition, both partial and general equilibrium models have been developed to analyze world markets for agricultural commodities and the effects of government policies on such markets. Alongside the modeling of markets and the quantitative impact of policies, several indicators have been developed that build on trade policy measures, including effective protection and tariff equivalents. One example is the producer subsidy equivalent. This has been used by the OECD to estimate the level of support provided by government policies to the agricultural sector. The indicators have more recently been applied to developing countries as a form of benchmarking to give a snapshot of the transfers among stakeholders inherent in such policies.
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International Climate Change Policy
Gabriel Chan, Robert Stavins, and Zou JiVol. 10 (2018), pp. 335–360More LessInternational cooperation to address the threat of climate change has become more institutionally diverse over the past decade, reflecting multiple scales of governance and the growing inclusion of climate change issues in other policy arenas. Cooperation under the United Nations Framework Convention on Climate Change has continued to evolve from the 1997 Kyoto Protocol to the 2015 Paris Agreement, while other governmental and private sector international fora for cooperation have arisen. As the level of activity in international cooperation on climate change mitigation has increased, so too has the related scholarly literature. In this review, we synthesize the literature on international climate change cooperation and identify key policy implications, as well as those findings most relevant for the research community. Our scope includes critical evaluation of the organization and implementation of agreements and instruments, retrospective analysis of cooperative efforts, and explanations of successes and failures.
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Identifying the Economic Impacts of Climate Change on Agriculture
Vol. 10 (2018), pp. 361–380More LessThe ultimate impact of climate change on human systems will depend on the natural resilience of ecosystems on which societies rely as well as on adaptation measures taken by agents, individually and collectively. No sector of the economy is more reliant on climate than agriculture. Evidence from the American settlement process suggests that societies can successfully adapt to new climatic environments. Whether and how much agriculture will manage to adapt to a changing climate remains an open question in the empirical economics literature, however. This article reviews the existing evidence on weather and/or climate impacts on agricultural outcomes from the economics literature, with a focus on methodological questions. Some key econometric issues associated with climate impact measurement are discussed. We also outline important questions that have not been adequately addressed and suggest directions for future research.
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Efficacy of Command-and-Control and Market-Based Environmental Regulation in Developing Countries
Vol. 10 (2018), pp. 381–404More LessLike their counterparts in industrialized countries, environmental regulators in developing countries rely principally on two types of instruments: command-and-control (CAC) policies, such as emissions and technology standards, and to a lesser extent, market-based instruments (MBIs), such as emissions fees and tradable permits. But these regulators often lack the capacity to implement, monitor, and enforce CAC and MBI policies. As a result, the efficacy of those policies is an empirical matter. We review emerging experimental and quasi-experimental evidence on CAC and MBI policies in developing countries, specifically, from 32 studies of CAC policies and 8 studies of MBIs. Although drawn from a small and decidedly nonrandom sample of countries and policy types, the evidence clearly indicates that CAC and MBI policies can have significant environmental benefits in developing countries. In addition to cataloging and reviewing this evidence, we discuss data and methodological challenges to augmenting it and suggest directions for future research.
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Social Norms and the Environment
Vol. 10 (2018), pp. 405–423More LessSocial norms affect environmental quality. But what exactly is a social norm? Environmental economists studying the topic draw on diverse scholarly traditions and may not have the same phenomenon in mind when using the concept. For example, social norms may refer to common, but not necessarily socially approved, behaviors; to internalized ethical rules; or to one of several equilibria in a coordination game. I first discuss some of the definitions used in the environmental economics literature. Then, I outline a simple framework for analysis of voluntary contributions to public goods. Using this framework, I illustrate differences and similarities between altruism, moral norms, and social norms and discuss implications for environmental policies. In particular, when a social norm represents one of several stable equilibria, policy can potentially invoke abrupt and dramatic behavioral changes.
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