From an editorial in last Sunday’s New York Times:
Food aid is one of the most important tools of American foreign policy. Since the mid-1950s, the United States has spent nearly $2 billion annually to feed the world’s poor, saving millions of lives. But the process is so rigid and outdated that many more people who could be helped still go hungry. Reforms proposed by President Obama will go a long way toward fixing that problem and should be promptly enacted by Congress. Continue reading →
How does commodity price volatility affect the welfare of rural households in developing countries, for whom hedging and consumption smoothing are often difficult? And when governments choose to intervene in order to stabilize commodity prices, as they often do, who gains the most? This article develops an analytical framework and an empirical strategy to answer those questions, along with illustrative empirical results based on panel data from rural Ethiopian households. Contrary to conventional wisdom, we find that the welfare gains from eliminating price volatility are increasing in household income, making food price stabilization a distributionally regressive policy in this context.
That’s the abstract of an article Chris Barrett, David Just, and I have been working on since 2007, and which has just been accepted for publication by the American Journal of Agricultural Economics.
In this article, we ask the question: What is the effect on rural households of increasing the uncertainty (i.e., volatility) surrounding the prices of the staple crops they produce and consume, holding the levels of those same prices constant? In other words, we isolate the impact of an increase in the variance of a price distribution holding the mean of that price distribution constant, and we look at the effects of the covariance between each pair of prices, since a price never varies alone.
To answer those questions, we use publicly available survey data from rural Ethiopia and study the welfare impacts of volatility in the prices of coffee, maize, beans, barley, wheat, teff, and sorghum.
This article, I think, is my best piece of research so far, and it is not without reason that I used it as my job-market paper this year. It really has everything one wants one’s research articles to have: Continue reading →
Since the 1940s raisin farmers have been obliged to make over a portion of their crop to a government agency called the Raisin Administrative Committee. The committee, run by 47 raisin farmers and packers, along with a sole member of the raisin-eating public, decides each year how many raisins the domestic market can bear, and thus how many it should siphon off to preserve an “orderly” market. It does not pay for the raisins it appropriates, and gives many of them away, while selling others for export. Once it has covered its own costs, it returns whatever profits remain to farmers. In some years there are none. Worse, farmers sometimes forfeit a substantial share of their crop: 47% in 2003 and 30% in 2004, for example.
Participation in this Brezhnevite scheme is mandatory. Although a large majority of raisin farmers approved of it by referendum when it started 65 years ago, they have not been formally consulted since. And raisins are just one of 30 products subject to such “marketing orders” overseen by the Department of Agriculture.
From an article in this week’s edition of The Economist.
Since the 1940s? Thirty such marketing orders? I wonder why the asinine crowd who usually delights in braying “Socialiss’!” in this country hasn’t made itself heard on this matter yet.
Land Economics has now published my article on the productivity impacts of land rights in Madagascar, which is creatively titled “The Productivity Impacts of Formal and Informal Land Rights: Evidence from Madagascar.”
Here’s the abstract:
This paper studies the relationship between land rights and agricultural productivity. Whereas previous studies used proxies for soil quality and instrumental variables to control for the endogeneity of land titles, the data used here include precise soil quality measurements, which in principle allow controlling for the unobserved heterogeneity between plots. Empirical results suggest that formal land rights (i.e., land titles) have no impact on productivity, but that informal land rights (i.e., landowners’ subjective perceptions of what they can and cannot do with their plots) have heterogeneous impacts on productivity.
In other words, what I find is that no matter how you slice the data, land rights do not appear to have the beneficial effect many people seem to think they have. The emphasis is mine, for reasons that are perhaps best explained in the last paragraph of the paper:
[T]he US government’s Millennium Challenge Corporation signed a $110 million, four-year compact with the government of Madagascar in 2005 which included an important land tenure component, and whose goal was to “increase land titling,” and thus land security (Millennium Challenge Corporation 2010). But in a context where land titles do not seem to have improved agricultural productivity, the finding that land titles do not have such an impact is highly relevant for policy in that it helps knowing where to allocate aid dollars at the margin. Here, it looks as though aid might be better allocated to a reform of the legal framework within which agriculture takes place. Policy should be based on empirical evidence — not theoretical beliefs.
At the end of the day, the land titles in those data appear to be worth no more than the paper they are printed on.
What’s interesting to me about these findings, in light of my evolving research interests, is that many others find that land rights have beneficial effects on productivity. Generally speaking, however, it looks as though those beneficial effects of land titles are found in former British colonies in Africa. In former French colonies such as Madagascar, however, it looks as though land titles have no impact. This brings to mind a passage from Herbst’s States and Power in Africa:
France was notable for its unusually unsuccessful efforts to disrupt customary tenure during the colonial period, despite its sweeping laws that theoretically made wholesale changes in land tenure (…) France relied on administrative fiat to try to change customary tenure procedures.
Does anyone know of a study looking at the differential approaches to or impacts of British vs. French colonial institutions dealing with land tenure issues? I think there would be a neat paper to be written on that.
Right here in America, under our collective nose, there is an industry that survives on political patronage and government subsidies, that regularly receives mysterious and untraceable bailouts funded by taxpayers, that is disproportionately influential in Washington as a result of its massive lobbying efforts, and that is making huge profits at the expense of ordinary consumers.
I’m not talking about Wall Street. I’m talking about the American sugar industry, which for years has been a perfect case study for the corrupting influence of money in politics. …
Today’s Wall Street Journal has a story about the Department of Agriculture’s decision to consider bailing out the U.S. sugar industry by buying 400,000 tons of sugar from major U.S. producers, at a taxpayer-funded cost of roughly $80 million. …
Why does the U.S. sugar industry need an $80 million bailout, you ask? Because sugar-makers are in danger of defaulting on loans the government gave them as part of a previous bailout program.
That’s from a very interesting article published a few weeks ago in New York magazine which discusses the political economy of agricultural subsidies in the United States.
The article was very à propos given that we’d just finished discussing farm subsidies in my food policy seminar.
Why does the sugar sector benefit from such subsidies, which end up costing consumers through both the prices they pay and their tax bill? As we have discussed several times in my seminar, the reason is essentially that it is easier for producers to organize and lobby the government than it is for consumers to do the same.
In The Logic of Collective Action, Olson noted that smaller groups have an easier time organizing than large ones do, and studies have shown that smaller commodity groups such as sugar producers get better subsidies than larger commodity groups such as corn producers.
Therefore, as the agricultural sector declines and the number of farms decreases, lobbying becomes a much better proposition for farmers, and the subsidies get increasingly better. For more on the political economy of farm subsidies (and on the politics of food in general in the US), everyone should read Rob Paarlberg’s Food Politics: What Everyone Should Know.