Agricultural and Applied Economics—Without Apology
I am at the 10th Midwest International Economic Development Conference in Madison, WI this weekend, presenting a paper (link opens a .pdf) on female genital cutting in The Gambia, which I wrote with my former advisee, Tara Steinmetz.
The conference schedule includes many interesting papers, some of which I hope to blog about over the next few weeks. Martin Ravallion will be the keynote speaker at tonight’s dinner. If you are there, come say hi.
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:
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.