Agricultural Foreign Investment and Host Country Institutions: FDI as Usual?
In this paper, we investigate the recent trend of increased global investment in farmland. We build off of the literature on sectoral flows of foreign direct investment (FDI) in order to determine if these new investments conform to traditional political economy explanations of cross-national investment flows. We hypothesize that recent farmland purchases, and agricultural FDI more generally, should not conform to previous expectations and results for similar analyses of other industrial sectors and overall FDI flows and stock. We employ unique time series cross-sectional FDI data from UNCTAD, disaggregated into sectors. We use these data to replicate traditional models of FDI inflows, with sector specific FDI as the dependent variable and host country institutions as our primary independent variables. The results of the analysis support our hypothesis, with none of the traditional democracy or institutional variables demonstrating a significant impact on agricultural FDI. We argue that this is partly because the bargaining relationship between host and investor countries is more difficult to assess than investments in other sectors. Land is the primary factor of production in these investments. Thus, domestic capital and labor markets have less impact on the decision making calculus of firms and the policy choices of host countries. This is consistent with older theories concerning the obsolescing bargain between firms and governments, but contradicts much of the recent received wisdom on the institutional determinants of investment in political economy literature.
Penn State University
Legislative Institutions, Cash Crops and Agricultural Trade Liberalization in Developing Countries
Agricultural trade liberalization in developing states has been a contentitious issue-area despite the spread of democracy and the concurrent “rush” to free trade across the developing world since the mid-1980s. In fact, while many democracies in the developing world have adopted agricultural trade reforms, other developing country democracies have steadfastly opposed trade liberalization in the agricultural sector. This variation suggests that the link between democracy and agricultural trade reforms is more nuanced than anticipated which raises the following question: when are developing country democracies more likely to adopt agricultural trade liberalization? We develop a political economy model of agricultural trade politics which suggests that agricultural trade reforms in developing country democracies is determined by two factors: concentration of land devoted to cash crop cultivation and legislative rules that gives the incumbent party (or parties) control over agenda setting as well as the power to strip legislators who vote against the party line of their legislative mandates. Concentration of cash crop cultivation gives rise to “special interest” groups in the agricultural sector and facilitates collective lobbying for agricultural trade reforms by these special interests who influence incumbents to adopt such reforms to facilitate cash crop exports. Such collective lobbying leads to agricultural trade liberalization in developing democracies where legislative rules allow incumbent parties to control their legislators and the policy agenda as these rules provide incumbents with the legislative capacity to implement agricultural trade reforms favored by the cash crop-based special interests. Statistical results from a newly developed pooled sample of agricultural trade reforms in developing country democracies as well as within-country historical and statistical analysis of agricultural trade polices from two cases support the model’s main predictions.
Agricultural Policy Analysis: Some Finger Exercises Using Recent Elasticity Estimates
Analysis of agricultural policy can be obtuse and difficult to access, partly due to the complexity of policies themselves, and in part because of the complexity of the various computational models used to analyze them. Even for well-trained experts in the field (like me?), it can be difficult to access, much less appreciate, underlying assumptions. Is a simpler, more accessible analysis possible?
In this paper I will attempt to analyze three major agricultural policies (1) crop commodity programs (Price Loss Program and Agriculture Risk Coverage); (2) the Conservation Reserve Program; and (3) crop insurance, all while attempting to limit myself to the elementary tools of supply and demand. I begin by laying out some stylized facts about commodity prices, storage and production, and summarize literature that provides fairly persuasive evidence about the approximate magnitude of these elasticities. Some of this analysis reveals another critical challenge: agricultural policy, like farmers, respond to market forces, which can further obfuscate analysis policy impacts. While these finger exercises are no substitute for full-fledged computational models, perhaps they are useful cross-check, and a better means for communicating policy implications to a broader audience.
Michael J. Roberts
University of Hawai`i at Mānoa
Utilizing Geographic Data to Disentangle the Relationship between Ethnicity and Agricultural Policy Decisions in Sub-Saharan Africa
Do policy makers use governmental power to advance the economic interests of their co-ethnics? A central question in the political economy of the developing world involves the intersection of wealth, group identity, and the use of state power. In sub-Saharan Africa, this manifests itself in rates of taxation or protection of agricultural production. Because ethnic groups tend to be geographically concentrated, it has long been hypothesized that, by differentially taxing or protecting certain agricultural products, policy makers can benefit members of their own ethnic group while shifting economic burdens to others. At the same time, an important paper by Kasara (2007) challenges this narrative, showing that cash crop farmers from leaders' ethnic groups face higher, not lower, taxes on agricultural products. Here I revisit the relationship between ethnic identity and tax policy. Utilizing highly disaggregated (five arc-minute grid-cell) geographical data on crop production and geocoded ethnicity data, I generate a sub-national measure of the degree to which ethnic groups are associated with particular crops. I then use this measure to investigate the link between the ethnic group(s) in power at the executive level and the rate of taxation or protection for the product(s) associated with those groups. My findings demonstrate that agricultural policy in the developing world is driven by ethnic as well as economic considerations, and showcases the value of fine-grained geographical data for assessing causal hypotheses in observational contexts.
Michigan State University
Soo Yeon Kim
National University of Singapore
Arizona State University
Agriculture and the WTO Dispute Settlement Procedure
This paper examines the use of the WTO dispute settlement procedure (DSP) for agricultural issues. Agricultural trade has been one of the most difficult of all of the issue areas covered by the WTO and its predecessor, the GATT. It is therefore no surprise that many of the disputes handled by the DSP have been agricultural in nature. I develop a theoretical argument for the likelihood of observing agriculture related WTO disputes grounded in bargaining theory. This argument is then tested in a statistical analysis spanning 1995-2014 that compares the determinants of agricultural disputes versus all other issue areas. The findings suggest that agriculture is somewhat different in the onset and duration of disputes than other sectors as expected by the theoretical framework.
Impacts of Local Immigration Enforcement on Farm Profitability
This study provides the first causal estimate of the impact on an immigration policy on U.S. firms. An unbalanced panel of confidential national farm survey data and aggregated county-level farm census data are used to test the impact of enhanced county-level immigration enforcement on various indicators of labor supply shocks and profitability. The potential endogeneity of enhanced enforcement through the 287(g) program is addressed by using county jail occupancy as an instrumental variable. Our results are consistent with labor supply shocks and suggest a long-run decline in farm profitability. Farms in counties adjacent to those participating in 287(g) appear to have benefited from a positive labor supply shock. These results suggest that that labor-saving technology and native workers are at best partial substitutes for immigrant farm workers.
The University of Kansas
Processed Goods: How Commodity Markets Respond to Politics
How do commodity markets process news about political events? Commodity markets are one of the few conduits where politics can directly affect the economy. They determine the prices of everything we see and consume. Futures allow traders to lock in sale and delivery. Options allow traders to pay for the right, but not the obligation, to make or take delivery. More exotic derivatives allow traders to parlay bets across markets. Research shows how economic shocks affect these investments. Less is known about unexpected political shocks. Where do traders turn to insure themselves against political risk? Political shocks produce observable changes in options markets but do not have significant effects on futures markets. The irregular nature of political shocks makes political risk difficult to price into futures contracts. The potentially serious consequences of political shocks increase option premiums. I use a series of multivariate GARCH models to test these expectations in a variety of commodity markets. The results show that political instability is processed in options markets and only indirectly effects futures markets through options. I conclude by outlining a set of stylized facts about politics and commodity markets that suggest fruitful avenues for future research.
Does More Public Transparency in Trade Negotiations Increase Social Welfare?
Motivated by the public call for more transparency in the TTIP negotiations, we present a game-theoretic model arguing that greater public transparency does not necessarily lead to higher social welfare. Political agents can benefit from providing citizens with misleading information aimed at aligning citizens’ choices with the political agent’s preferences. Citizens can lose from being fooled by political agents, though they can mitigate their losses by conducting costly inspections to detect false information. Producing and detecting false information is costly and can reduce social welfare. We discuss examples in which limited transparency has been a prerequisite for final success.
The University of Illinois
Urban Unrest and Consumer Food Prices in the Developing World
Recent empirical studies have begun to converge around the finding that rising food prices lead to an increase in the probability of sociopolitical unrest. Most of these studies, however, are limited to Africa and the Middle East in the post-Cold War era and few have considered the effect of rising food prices in different economic or political contexts. Using the recently expanded Urban Social Disorder v2 dataset, this study extends the geographic and temporal scope of earlier research to 74 developing countries of Africa, Asia, Latin America, and the Middle East between 1974 and 2014. We also investigate the effect of rising food prices on unrest in countries with different level of human development and different regime types. We find that monthly food price spikes lead to increased probability of urban unrest. We find that this effect is not moderated by increased human development but it is more pronounced in countries with more consolidated democratic and autocratic regimes compared to mixed regimes. We find no significant difference between the effect of food price spikes in countries with more democratic and autocratic regimes but we argue that these similar effects are explained by different theories of political protest or civil conflict.
Peace Research Institute Oslo
Todd Graham Smith
University of Nevada, Reno
Kelly A. Davidson
Using Nudging and Nutrition Education to Encourage Improved Nutrition in Bangladesh
Although Bangladesh has experienced rapid economic growth, the nation still faces malnutrition challenges because of a lack of dietary diversity. Using a randomized control trial design, we measure the impacts on meal diversity of a food plate printed with a pictorial diagram of properly portioned local food items, a nutrition education intervention, and their interaction. Meal diversity is measured by discreetly observing a large sample of study participants make food choices at two buffet meals. The experimental design allows us to test the effectiveness of nutrition interventions when the constraints to obtaining healthy food items, namely income and access constraints, are removed. We find that the food plate alone does not impact meal diversity, but there is a positive and significant effect when the plate is combined with participatory training on nutrition. However, analyses of the consumption of individual food items show no evidence that either intervention reduces rice consumption.
University of Florida
Jaclyn D. Kropp
University of Florida
University of Florida
Is There a Sectoral Conflict Trap? Economic Growth, Structural Change and Violent Conflict?
Violent conflict makes the affected population more vulnerable to climate change impacts. However, violent conflict does not only directly increase vulnerability, it can also do so through hampering long-term economic development, in turn increasing the risk of further violence. We seek to further investigate this endogenous logic by disaggregating the economy into specific sectors. We suggest that there is a possibility for a “sectoral conflict trap”, where conflict prevents the rural poor from seeking more productive opportunities outside the agricultural sector. This should not only be detrimental for economic growth, but also directly relevant for conflict risk because wealth in agriculture is easily captured and controlled through the use of force, as opposed to wealth based on industry or services. We aim to build a system of dynamic equations which endogenize the relationship between economic growth, structural change, and violent conflict. We will evaluate these models using out-of-sample prediction, and make endogenous forecast scenarios based on the Shared Socio-Economic Pathways.
Peace Research Institute Oslo
Peace Research Institute Oslo
Nina Von Uexkull
Nina Von Uexkull
Flight, Fight or Farm? Agricultural Dependence and Participation in Land-related Conflict
Land-related issues are important drivers of contention in contemporary armed conflicts. Yet, our understanding of why individuals participate in land-related conflict is limited. On the basis of interview material on 75 members of the Sabaot Land Defence Force (SLDF) from the Mt. Elgon region of Kenya, this study proposes that agricultural dependence is crucial to understanding participation. Where land is the main source of income, losing access has grave economic consequences. As land and crops are immobile assets, individuals are tied to their land and less likely to leave a situation of instability in their home area. This makes them more vulnerable to the adverse effects of conflict, such as forced recruitment by armed groups or peer-pressure. Staying in a conflict zone, individuals depending on agriculture are also particularly vulnerable to a conflict’s adverse economic effects, such as displacement from their farms, looting and the destruction of farm goods. Where individuals experience conflict-related economic shocks, opportunity costs for engaging in violence are low and economic grievances rise. In addition, individuals dependent on agriculture have higher expected benefits of joining a fight that promises land access, given the centrality of land for their livelihood. These interlinked mechanisms are mutually reinforcing and together suggest that agricultural dependence is an important explanation of participation in land-related violence. Mt. Elgon shares characteristics with many other locations that experience land-related conflict, such as legal uncertainty about land tenure, scarcity of land resources, in-migration, being located in the periphery of the country and the importance of ethnic entrepreneurs for instigating violence.
Cullen S. Hendrix
University of Denver
Peterson Institute for International Economics
The Streetlight Effect in Agricultural Economic Research on Africa
The streetlight effect is the tendency for researchers to focus on particular questions, cases and variables for reasons of convenience or data availability rather than broader relevance, policy import, or construct validity. To what extent does the streetlight effect condition the state of knowledge about agricultural economics in Africa
Analysis of Google Scholar search results, both general and within leading agricultural economics-related journals, reveals that three quasi-objective factors driving interest – agricultural dependence, volume of agricultural land, and population and poverty prevalence - are associated with a higher volume of scholarly attention. However, many factors not directly related to dependence on agriculture or levels of need - like past scholarly attention, British colonial history, strong civil liberties, and to a lesser extent political stability affect scholarly attention. The streetlight effect is evident in research on the climate-conflict link on Africa, and has implications for the applicability of our existing stock of knowledge to confronting vexing issues of agriculturally-led development in less familiar contexts.
Food Price Shocks and Political Instability
The recent wave of protest across the Arab world and beyond took pundits and policy makers equally by surprise. A striking backdrop to these events was the contemporaneous shock in international food prices, and several prominent studies argue that the protests should be seen at least partly as reactions to soaring food prices. Thus far, however, relevant comparative research has focused on violent conflict and civil war, and little is known about how fluctuating food prices influence the national political context in other ways. This paper seeks to address that lacuna. Focusing explicitly on state actors, we define political instability as rapid, wide- ranging, and unexpected (but not necessarily violent) changes to the regime, including its legal or political mandate. Examples of relevant forms of instability include unnatural death or resignation of the executive, replacement of members of the cabinet, constitutional changes, declaration of a state of emergency, postponement or abolition of planned election, and coups d’état. Moreover, to gain leverage on plausible causal pathways, we consider both domestic consumer price fluctuations, international food prices, and distinct food policies (subsidies, price control) that might dampen or accentuate system-level shocks. A quantitative analysis of food price fluctuations and political instability across developing countries for all months since 1990 serves to evaluate the expectations. Results tbd.
University of Maryland
The Impacts of Introducing a Farm to School Program on National School Lunch Program Participation and Selection of Salads
Farm to School Programs (FTS) typically consist of one or more of the following activities: local procurement of products served in school cafeterias, hands-on learning activities such as school gardens, and integrated nutrition education. However, the key feature of these programs is local procurement. While several prior studies examine the impacts of FTS programs on National School Lunch Program (NSLP) participation and selection of healthier food items in school cafeterias, the results of these studies have been mixed. The drawbacks of these prior studies include relying on self-reported behavioral changes, parent surveys, production records or plate waste data collected for only as short period of observation. This study contributes to the literature by analyzing the impacts of the newly implemented FTS program in elementary schools in Alachua County, Florida on NSLP participation and the selection of healthier NSLP meal offerings. Local procurement of products through the FTS program began in November of 2015. Using school-level point of sale data for the entire 2015/2016 school year, school-level demographic data, and school-level FTS and Fresh from Florida (FFF) procurement records, we find schools sold 6.1 more NSLP meals and 10.2 more NSLP meals, on average, on days when FTS and FFF produce were used to prepare school meals, respectively. FTS products were source from within 150 miles including farms in southern Georgia, while FFF products were sourced throughout the state of Florida. We also find the percentage of total meals sold that were salads was approximatley1.4% higher on days when FFF products were used in the preparation of the salad offerings.
Jaclyn D. Kropp
University of Florida
Benjamin Yao Avuwadah
University of Florida
The Economic Viability and growth of organic farming: An Analysis Organic Price Premiums and Their Transmission Into Farm Prices
Facilitating the growth of the organic industry is central to the U.S. public policy priority of developing economically, environmentally and socially sustainable local and regional food systems. The organic food market has grown rapidly since the 1980s and has opened up new opportunities for farmers, food manufacturers, and retail grocers. However, the industry is facing important challenges to meet the growing demand and stay globally competitive. Also, the state of academic research on organic foods is hindered by the lack of comprehensive micro-level data on organic marketing. In this paper, we address these issues by studying organic price premiums at retail and their transmission into farm prices in the fresh fruits and vegetables market, which is the largest organic food category in the United States. Specifically, we construct price indices for a panel of Metropolitan Statistical Areas in the United States using point-of-sale scanner data for both organically and conventionally grown farm products to estimate temporal and spatial changes in organic price premiums. Then, we use the panel price indices to investigate the determinants of price premiums and evaluate the impact of price premiums on the growth of the organic industry. The implications of our results for organic farming and marketing, and organic policy are discussed.
University of Minnesota