Agricultural & Resource Economics Theses and Dissertations

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Environmental Federalism: Chinese Governmental Behaviors in Pollution Regulations
(2019) Yan, Youpei; Lichtenberg, Erik; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
China's economic growth has come with the cost of environmental deterioration. The economy has faced with many problems in land resource depletion and industrial pollution. I examine two policies that tackle three major environmental aspects on land, water, and air in China. All three chapters share the theme that devolution without enough oversights in environmental policies has lead to unintended consequences in practice, as local officials have their trade-offs to promote local economy and protect environment. The first chapter explores the local government's behavior in a land conservation program, which intends to reduce soil erosion by subsidizing afforestation of low productive farmland on steep slopes. Theoretically, the incentives created by the program combined with insufficient oversight have led to afforestation of highly productive farmland on level ground. With a unique land transition dataset, I show that this unintended land use effect has been substantial. This unexpected displacement of highly productive farmland represents a form of leakage that has not been fully explored in the literature. And it is problematic to a country with limited arable land relative to population size as it can negatively impact national food production targets and self-sufficiency goals. The second chapter investigates water pollution activities under China's Pollution Reduction Mandates. In response to the substantial environmental deterioration, the central government taxes firm emissions and subsidizes abatement technology installation. In theory, devolution to local governments to lower pollution and promote economic growth can create local incentives to allocate subsidies to effectively export pollution. I provide the first evidence of the magnitude of these distortions with unique firm-level pollution panel data and find evidence of water pollution exported to downstream and further away from local residences. A simulation indicates that the distortions created by local jurisdictional control harm the environment substantially: centralized allocation of subsidies could reduce total emissions by 20-30%. The third chapter keeps investigating the inter-jurisdictional pollution externalities on air pollution under the same mandates. It provides a complimentary evidence to show that local governments have incentives to promote spatial spillovers and free-ride on the downwind neighbors.
MERGER EFFICIENCIES IN THE U.S. BOTTLED WATER INDUSTRY
(2019) Zhang, Jun; Olson, Lars; Sweeting, Andrew; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation contributes to the literature concerning horizontal merger efficiencies and non-price competition in merger analysis. It focuses on the U.S. premium bottled water industry, where manufacturers face both price and non-price competitions. Chapter 1 gives an overview of this dissertation and chapter 2 to chapter 4 are three papers that the dissertation features. In chapter 2, I study the market power and marginal cost efficiency that was created following the merger of Coca-Cola and Glaceau in the U.S. premium bottled water market by assuming a vertical relationship between upstream manufactures and downstream retailers. In this framework, bottled water manufacturers are assumed to compete solely in prices and product attributes are exogenous. My supply-side model allows for a merger efficiency on Glaceau products by including an indicator for Glaceau products post-merger in the marginal cost function. With counterfactual simulations based on the demand and supply-side estimates, I show the merger has limited impacts on market power while marginal cost efficiency plays an important role in affecting the equilibrium prices and market shares post-merger. In chapter 3, I develop a conceptual framework by extending the vertical relation in chapter 2 to incorporate multi-dimension non-price competitions. This conceptual framework can be applied to consumer good industries with both price and non-price competitions. In this chapter, I provide a detailed description of model derivations, estimation strategies, and counterfactual simulations. In chapter 4, I apply the framework developed in chapter 3 to the merger of Coca-Cola and Glaceau and explore how horizontal merger efficiencies affect the equilibrium market outcomes considering both price and non-price competitions. To understand the underlying mechanisms that rationalize Glaceau's significant boosts in market shares, product varieties, and advertising expenditures post-merger, I estimate a structural demand and supply model where manufacturers choose wholesale prices, product varieties, and advertising, and I allow for several types of efficiencies on Glaceau. With counterfactual simulations, I show how marginal cost, product variety fixed cost, and advertising fixed cost efficiencies affect equilibrium market outcomes and consumer welfares.
Essays on the Efficient Management of Water Resources
(2019) Rosenberg, Andrew; Olson, Lars J; Newburn, David A; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
In the first analysis of this dissertation, I assess the water use savings and cost-effectiveness of the Conservation Reserve Enhancement Program (CREP) in the Upper Arkansas River basin in Kansas, a water rights retirement program aimed at reducing depletion of the High Plains Aquifer. First, I use a fixed effects model with matched samples of farmers to determine the effect of CREP on water use. I find that for every unit of authorized water use retired in CREP, 0.8 units of water are saved per year. Second, I examine how a rights retirement program would perform outside of the policy region and how the existing program design could be improved upon. I estimate a probit regression to determine which factors most influence the probability that a farmer enrolls in CREP. Using the results of the probit regression, I then simulate enrollment decisions outside of the policy region to assess the cost-effectiveness of different incentive designs. I find that programs that pay incentives based on past levels of water extraction save water more cheaply than programs that pay based on acreage retired. I also find that programs such as CREP that offer higher incentive rates to farmers that enroll later are more efficient than programs that never increase rates. In the second analysis, coauthors and I assess the household value for stream restoration, a common approach used by local governments to mitigate the water quality impacts of urban stormwater. We conduct a choice experiment in the Baltimore metro region to examine household willingness to pay (WTP) for stream restoration. We vary the land ownership of restoration locations and the distance from households to streams in hypothetical choice scenarios that include changes in several stream restoration attributes. Our results indicate that household WTP for improvements in stream bank stabilization and nutrient reduction are positive and significant on public and private land across all distances. We find significant heterogeneity in WTP across land ownership and proximity to a stream. This heterogeneity in WTP can be of particular interest to policy makers when making decisions about where, and even how, to restore streams.
ESSAYS ON QUALITY CERTIFICATION IN FOOD AND AGRICULTURAL MARKETS
(2017) Adalja, Aaron Ashok; Houde, Sebastien; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation features three essays exploring the market impacts of two types of quality certification---a voluntary non-GMO label and a mandatory food safety standard. In the first essay, I use a hedonic framework to examine whether firms use a voluntary quality certification for non-GMO products to extract rent from customers. Using U.S. retail scanner data coupled with data from a voluntary non-GMO label, I find no evidence of price premiums or quantity changes for newly certified non-GMO products. Instead, the label may induce firms to develop new non-GMO products targeted to high-valuation consumers. The second essay examines how voluntary non-GMO food labeling impacts demand in the ready-to-eat [RTE] cereal industry. I estimate a discrete-choice, random coefficients logit demand model using monthly data for 50 cereal brands across 100 DMAs. Consumer tastes for the label are widely distributed, and this heterogeneity plays a substantial role in individual choices; but, on average, the non-GMO label has a positive impact on demand. I estimate welfare effects by simulating two labeling scenarios: one in which all brands use the non-GMO label, and one in which no brands use the label. The simulation results suggest that non-GMO labeling in the RTE cereal industry may improve consumer welfare on average. In the final essay, we use data from an original national survey of produce growers to examine whether complying with the Food Safety Modernization Act's Produce Rule will be prohibitively costly for some growers. We examine how food safety measure expenditures required by the Rule vary with farm size and practices using a double hurdle model to control for selectivity in using food safety practices and reporting expenditures. Expenditures per acre decrease with farm size, and growers using sustainable farming practices spend more than conventional growers on many food safety practices. We use our estimates to quantify how the cost burden of compliance varies with farm size. We also explore the policy implications of exemptions to the Rule by simulating how changes to exemption thresholds might affect the cost burden of each food safety practice on farms at the threshold.
AGRICULTURAL POLICY AND PRODUCTION IN THE PRESENCE OF RISK AND INCOMPLETE FINANCIAL MARKETS
(2017) Voica, Daniel Constantin; Chambers, Robert G; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Economic interventions are rarely free of debate, hence it should come as no surprise that governmental agricultural policies are usually surrounded in controversy. A topic of debate in the World Trade Organization (WTO) is how to maintain the fragile balance between two opposite objectives: the need of governments to protect their farmers and the need for a subsidy system which does not distort farmers’ production decisions. Lump-sum transfers to farmers are commonly believed to affect the production choices of farmers in the presence of risk and uncertainty. Chapter 1 shows that if farmers have off-farm investment and employment opportunities, production decisions are decoupled from lump-sum subsidies in the presence of risk and uncertainty. The results are reconciled with existing results by showing that previously identified production adjustments are portfolio adjustments. Chapter 2 contributes to the debate surrounding agricultural policy support for farmers and the potential distortionary effects of area payments. Area payments can affect production decisions via land allocation. I show theoretically how the timing of these payments can weaken the link between area payments and production. The theoretical predictions are supported by the empirical findings. Chapter 3 explores the trade-off between health and food consumption, and the effectiveness of health interventions such as taxing unhealthy foods. Rational agents maximize utility over health and consumption of healthy and unhealthy foods, while health is a function of discretionary and non discretionary calories and nutrients. Calories are not available for purchase in the market, thus their pricing is derived via a ``household'' production technology used to convert healthy and unhealthy foods into health outcomes. Additionally, consumers face a physiological constraint, a minimum calorie intake, which has further implications in terms of reducing potential health benefits associated with governmental interventions, such as taxing high-calorie foods. The future budget available to consumers depends on the consumption of discretionary calories. The theoretical model is calibrated using financial and consumption data reflecting farmworkers's food consumption in the US.
Essays on China's Rural Land Rental Market: Institutions and Contract Design
(2017) Yang, Ziyan; Leonard, Kenneth; Murrell, Peter; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
China's rural land rental market, a gradually maturing market, is now revolutionizing agriculture in China by facilitating the upgrading of smallholder production to factory farming. I study a mature rural land rental market using survey data I collected in 2014, concentrating on institutions of the market and rental contract design. Chapter 1 focuses on the relationship between the rural land rental market and China's institutions for rural land and agricultural production in the past 30 years. Chapter 2 is devoted to survey design and data collection, introducing a new survey method that remedies deficiency of existing data and important variables that capture recent developments of the market. Chapter 3 describes the survey data from three perspectives to emphasize recent developments of the market, which includes heterogeneity in transactions (large-scale vs. small-scale) and market structure (modern vs. traditional) and changes in the role the village administration played in the market. Chapters 4 and 5, with different research focuses, analyze rental contracts as ex-ante responses to ex-post contract violation associated with the primary uncertainty in the market. Chapter 4 focuses on a hold-up transaction cost associated with the bargaining over contractual formality, which is caused by rental partners’ asymmetric preferences over contractual formality. I find that traditional rental transactions that occur only because of social proximity and the involvement of village administration are gradually being eliminated due to high transaction cost. Instead, the renting-in entrepreneurs from outside of the village are encouraged. In addition, I find that the renting-in agents usually lead the bargaining. Chapter 5 concentrates on the bargaining over two important contractual terms: contractual flexibility and rental payment. My theory shows which equations should be estimated in an empirical test of the bargaining process. I draw two empirical conclusions. First, local entrepreneurs, as the renting-in agents, decrease contractual flexibility and increase rental payment, which promotes agricultural and village development. Second, the rental payment offered to the renting-out agents with long-term non-agricultural employment is higher than that offered to the renting-out agents with short-term or temporary employment, suggesting a potential increase in income inequality within the village.
Food Product Recalls: Trends and Demand Impacts
(2016) Tselepidakis, Elina; Lichtenberg, Erik; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Food product recalls, the removal of risky food products from the marketplace, can impose significant burdens for consumers, producers, and regulators. The purpose of this dissertation is to offer an in-depth investigation of the trends and demand impacts of food product recalls. The first objective is to analyze trends and patterns of food product recall events from 2004 to 2013. The analysis considers multiple factors, including the types of foods being recalled, the reasons for initiating the recalls, the severity of the risks posed by the recalled products, and the geographic distribution. The second objective is develop a general Bayesian model to illustrate how consumers form perceptions of risk based on personal experiences and external signals, such as recall events. The model illustrates frequently observed behavior following the release of negative information: an immediate change in behavior, followed by a gradual return to previous, routine behavior. The third objective is to estimate the impact of leafy green recall events on the demand for packaged leafy green products by analyzing disaggregated household purchasing data. The results of this analysis suggests that iceberg and romaine recall events negatively impacted demand for the implicated leafy green in the weeks immediately following the recall. The fourth objective is to estimate the impact of STEC-contaminated ground beef recall events on the demand for ground beef products, differentiating between recalls prompted by consumer illness investigations and those prompted by laboratory testing. The results suggest that the impacts of recalls prompted by consumer illnesses outbreaks were often greater in magnitude and lasted longer than the impacts of recalls prompted by pathogen testing.
Essays in nonmarket valuation and energy economics
(2016) Miller, Mark Vincent; Alberini, Anna; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
This dissertation comprises three essays, relating to negative externalities in economics. The first essay concentrates on residential electricity consumption. In the economic literature, price elasticity of demands estimates for this market vary widely. In this essay, I seek to explain these findings using three nationwide datasets – the American Housing Survey, Forms EIA-861, and the Residential Energy Consumption Survey – from the U.S. I examine the role of the sample period, level of aggregation, use of panel data, use of instrumental variables, and inclusion of housing characteristics and capital stock. The findings suggest that price elasticities have remained relatively constant over the time period considered, from 1997 to 2009. Upon splitting my panel datasets into annual cross sections, I do observe a negative relationship between price elasticities and the average price. Whether prices are rising or falling appears to have little effect on the estimates. I also find that aggregating our data can result in both higher and lower price elasticity estimates, depending on the dataset used, and that controlling for unit-level fixed effects with panel data generally results in more inelastic demand functions. Addressing the endogeneity of price and/or measurement error in price with instrumental variables has a small but noticeable effect on the price elasticities. Finally, controlling for housing characteristics and capital stock produces a lower price elasticity. My second essay focuses on personal vehicular transportation, which is the source of several externalities, including congestion and conventional air pollutant and greenhouse gas emissions. In this work, I examine the geographical distribution of carbon dioxide emissions from cars. Specifically, I focus on rural and urban households in the UK, using repeated cross sections from the UK National Travel Survey. I contrast driving behavior with new vehicle purchases, and ask three related questions: First, do rural households purchase more vehicles, and/or vehicles with higher emissions rates? Second, do they drive more miles than their urban counterparts? Third, how do the “carbon footprints” from these two groups compare? To answer these questions, I first model the number of vehicles chosen by each household, and the emissions type of each. I then model the travel demand for that vehicle, conditioning on the latter choice. I use these results to estimate the contribution of rural and urban residents to total CO2 emissions. I find that rural households own more vehicles than urban households, and that these vehicles have higher emissions rates. Rural vehicles are also driven 12.9% more than urban vehicles. Lastly, I estimate a carbon footprint that is 58% higher for rural households than urban. My third essay considers an application of the hedonic price models, which are widely used in nonmarket valuation to find the value of environmental quality, changes in health risks, etc. The approach relies on property values. It is less commonly employed, however, to assess the value of certain amenities like crime mitigation. One problem with deploying hedonics in this area is that crime tends to be correlated with unobserved neighborhood attributes, and for that reason regression coefficients on crime may be biased. This chapter considers one particular set of crimes, methamphetamine laboratories, on property values. While methamphetamine labs are more likely to be established and discovered in some neighborhoods more than others, I follow previous literature by arguing that, within the confines of the neighborhoods they are discovered in, they are as good as randomly assigned and can thus be regarded as locally exogenous in regression analysis. I use three registers – one federal, two local – to identify the locations of past discoveries, in Summit County, OH, and categorize the discoveries by scale (e.g., a small discovery of meth in a dumpster versus an actual meth lab). I find mixed evidence that the value of homes closest to a discovery are negatively affected, either directly or in terms of relatively higher properties for properties that are somewhat further away from such discoveries. The effect, when identified, is slightly stronger for large-scale discoveries. I also consider the effect of information disclosure, and find that, for repeat sales observations, property sales that occur following a discovery within 200 meters and after public registers are available observe a sizable loss in value. The robustness each of these findings, however, appears questionable, since their magnitude and statistical significance are sensitive to model specification.
DEMAND FOR SAFER FOOD IN DEVELOPING COUNTRIES
(2016) Ordonez, Romina Valeria; Hoffmann, Vivian E; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
According to the WHO, in less developed countries approximately 2.2 million people—most of whom are children—die annually of food and waterborne diseases. In these economies, information on the safety attributes of food is usually not available and enforcement of food safety regulations is often weak, particularly within markets for locally consumed food. Still, food safety in the developing world has long been considered a secondary concern relative to food availability. The goal of this dissertation is to contribute to a deeper understanding of some of the constraints that surround demand for safer food along food supply chains in developing countries. Consumers’ demand for safe food can be thought of as an investment in preventive health, which has been shown to be extremely low in developing countries. Hence, this dissertation contributes to the economics literature that explores the impact of health-related information on preventive health behaviors in poor countries. This dissertation focuses on the role of food safety information in affecting people’s purchase behavior in a developing country setting. Because food safety is mostly a credence attribute that cannot be ascertained—or is too costly to ascertain—even after consumption, the provision of information has an important role to play in the reduction of information asymmetries inside the food chains. Among the several actors that are involved in food value chains, this dissertation focuses on small-scale informal intermediaries and consumers. The effect of information on these actors’ demand for safer food is assessed through the estimation of willingness to pay for food labeled as having safer characteristics, and through the analysis of the effect of different types of health-related information on the decision of whether or not to purchase food advertised as safer to eat. To achieve this, two field experiments using revealed preference methods were conducted in Kenya, where maize, the staple food, is frequently contaminated with aflatoxin, a naturally-occurring fungal toxin that is harmful to human health. A brief introductory chapter is followed by a comparison of the advancement of food safety policy and research in developed countries with the corresponding evolution in developing countries (Chapter 2). The framed field experiment described in Chapter 3 tests whether maize traders in informal markets are willing to pay more for higher quality and safer maize. 369 traders from different markets across Kenya participated in a second-price sealed-bid auction in which information on moisture content and aflatoxin contamination of maize auctioned was varied experimentally using labels. The results show that information on moisture content significantly affects traders’ willingness to pay and suggest the observability of moisture content is limited. Also, the effect of information does not appear to be driven by the possibility of selling drier maize to the formal sector, nor by the intention to keep the dryer maize for own family consumption. Further, the impact of providing traders with information on aflatoxin contamination is over twice as large as the effect of moisture content information. These results show that there is potential for strengthening the price-quality relationship within this context by increasing the availability of information on maize quality and safety. Chapter 4 presents the results of a field experiment conducted among customers of small retail shops in Nairobi and smaller urban centers in eastern Kenya. Packages of maize flour were tested for aflatoxin, labeled as safe to eat when they complied with the aflatoxin regulation, and offered for sale at a 20% premium above the price of untested maize. Information messages about the health consequences of aflatoxin exposure and about local contamination prevalence were randomly varied across customers as they entered the shops. The results show that the impact of health messaging on purchase of tested maize varies significantly depending both on the specific content of the message, and on the characteristics and prior beliefs of consumers. Information on the local prevalence of aflatoxin contamination, which exceeded the vast majority of customers’ contamination priors, had the strongest impact on demand. This study demonstrates that combining information on the prevalence of a risk with its health consequences is an effective approach for encouraging preventive health behavior.
Agriculture, Environmental Incentive Payments, and Water Quality in the Chesapeake Bay
(2016) Fleming, Patrick; Lichtenberg, Erik; Newburn, David; Agricultural and Resource Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)
Nonpoint sources (NPS) pollution from agriculture is the leading source of water quality impairment in U.S. rivers and streams, and a major contributor to lakes, wetlands, estuaries and coastal waters (U.S. EPA 2016). Using data from a survey of farmers in Maryland, this dissertation examines the effects of a cost sharing policy designed to encourage adoption of conservation practices that reduce NPS pollution in the Chesapeake Bay watershed. This watershed is the site of the largest Total Maximum Daily Load (TMDL) implemented to date, making it an important setting in the U.S. for water quality policy. I study two main questions related to the reduction of NPS pollution from agriculture. First, I examine the issue of additionality of cost sharing payments by estimating the direct effect of cover crop cost sharing on the acres of cover crops, and the indirect effect of cover crop cost sharing on the acres of two other practices: conservation tillage and contour/strip cropping. A two-stage simultaneous equation approach is used to correct for voluntary self-selection into cost sharing programs and account for substitution effects among conservation practices. Quasi-random Halton sequences are employed to solve the system of equations for conservation practice acreage and to minimize the computational burden involved. By considering patterns of agronomic complementarity or substitution among conservation practices (Blum et al., 1997; USDA SARE, 2012), this analysis estimates water quality impacts of the crowding-in or crowding-out of private investment in conservation due to public incentive payments. Second, I connect the econometric behavioral results with model parameters from the EPA’s Chesapeake Bay Program to conduct a policy simulation on water quality effects. I expand the econometric model to also consider the potential loss of vegetative cover due to cropland incentive payments, or slippage (Lichtenberg and Smith-Ramirez, 2011). Econometric results are linked with the Chesapeake Bay Program watershed model to estimate the change in abatement levels and costs for nitrogen, phosphorus and sediment under various behavioral scenarios. Finally, I use inverse sampling weights to derive statewide abatement quantities and costs for each of these pollutants, comparing these with TMDL targets for agriculture in Maryland.

Agricultural & Resource Economics Theses and Dissertations

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