RSS 1.0Cardon Working Papers Archive
ABOUT THE COLLECTION
The Cardon Working Papers Archive honors former professor and dean of the College of Agriculture, Bartley P. Cardon. The working papers in this series highlight recent research in agricultural and applied economics. Cardon Working Papers have not undergone review and are intended to make preliminary research results available to encourage discussion and suggestions for revision before publication.
This archive includes working papers produced from 2004 through 2022. No materials are currently being produced in this series.
QUESTIONS?
Visit College of Agriculture, Life & Environmental Sciences Publications at https://extension.arizona.edu/educational-materials.
Collections in this community
Recent Submissions
-
Recent Developments in Inference: Practicalities for Applied EconomicsWe provide a review of recent developments in the calculation of standard errors and test statistics for statistical inference. While much of the focus of the last two decades in economics has been on generating unbiased coefficients, recent years has seen a variety of advancements in correcting for non-standard standard errors. We synthesize these recent advances in addressing challenges to conventional inference, like heteroskedasticity, clustering, serial correlation, and testing multiple hypotheses. We also discuss recent advancements in numerical methods, such as the bootstrap, wild bootstrap, and randomization inference. We make three specific recommendations. First, applied economists need to clearly articulate the challenges to statistical inference that are present in data as well as the source of those challenges. Second, modern computing power and statistical software means that applied economists have no excuse for not correctly calculating their standard errors and test statistics. Third, because complicated sampling strategies and research designs make it difficult to work out the correct formula for standard errors and test statistics, we believe that in the applied economics profession it should become standard practice to rely on asymptotic refinements to the distribution of an estimator or test statistic via bootstrapping. Throughout, we reference built-in and user-written Stata commands that allow one to quickly calculate accurate standard errors and relevant test statistics.
-
Nonparametric Segmentation Methods: Applications of Unsupervised Machine Learning and Revealed PreferenceMany recent efforts by econometricians have focused on supervised machine learning techniques to aid in empirical studies using experimental data. By contrast, this article explores the merits of unsupervised machine learning algorithms for informing ex ante policy design using observational data. We examine the extent to which groups of consumers with differing responses to economic incentives can be identified in a context of fruit and vegetable demand. Two classes of nonparametric algorithms—revealed preference and unsupervised machine learning—are compared for segmenting households in the National Consumer Panel. Nonlinear almost-ideal demand models are estimated for all segments to determine which methods group households into segments with different expenditure and price elasticities. In-sample comparisons and out-of-sample prediction results indicate methods using price-quantity data alone—without demographic, geographic or other variables—perform better at segmenting households into groups with sizeable differences in price and expenditure responsiveness. These segmentation results suggest considerable heterogeneity in household purchasing behavior of fruits and vegetables.
-
Impact of COVID-19 Pandemic on Fresh Tomato Shipments and PricesThe implementation of stay-at-home orders in March 2020 to prevent the spread of COVID-19 and the rapid, dramatic downscaling of foodservice operations across the country represents an unprecedented shock to U.S. food supply chains. Consumer spending on grocery retail saw a dramatic surge as households stocked up on supplies and demand for food retail has remained elevated since. Meanwhile, demand for food away from home collapsed as restaurants and bars were ordered to cease all dine-in service. While this market shock is interesting per se, it can also offer more detailed insight into the supply, demand, and market structure for individual commodities. This study examines the impacts of the COVID-19 pandemic on the U.S. market for fresh tomatoes. Market data quantifying the volume, price, and origin of tomatoes sold via foodservice supply chains do not exist at the industry level, nor do data on the volume sold at retail. The COVID-19 pandemic offers an opportunity to examine responses in volume and price by origin to the demand shocks caused by the pandemic, and information can be gleaned indirectly regarding the market for foodservice tomatoes and the role of tomatoes of different origins within the foodservice industry.
-
Dissemination and Adoption of Bundled Agronomic PracticesThe methods used to cultivate rice are evolving as researchers innovate and develop agronomic practices to increase yield and farmer income. In the previous two decades, members of the RICE CRP, including IRRI, CIAT, and AfricaRice created and disseminated regionally-designed and locally-appropriate portfolios of agronomic practices in collaboration with local partners. These agronomic practices include 3 Reductions, 3 Gains (3R3G) and 1 Must Do, 5 Reductions (1M5R) in Vietnam; 10 and 10+ Practices in Brazil; and Smart-Valley or Sawah in West Africa. This paper presents the current available evidence on the diffusion and adoption of these technologies. While much has been written about these technologies, we find that previously published levels of dissemination and adoption tend to be inflated. However, this does not mean that the adoption of these technologies is limited. We document reliable sources of data on adoption for each technology and, where appropriate, use these data to estimate adoption rates in the regions of interest.
-
One Size Fits All? Experimental Evidence on the Digital Delivery of Personalized Extension Advice in NigeriaBlanket advice on optimal fertilizer application rates has failed to achieve potential yield gains for crop production in much of Sub-Saharan Africa. However, digital technology now makes it possible to deliver personalized extension services to farmers at a much lower cost. In this paper, we present results from a randomized control trial designed to evaluate the effectiveness of a mobile app that provides personalized advice on rice nutrient management. The experiment induced variation in both access to the app and access to an input grant for fertilizer. We find that households with access to the app have 15 percent higher yields and 20 percent higher profits. We show that, on average, personalized advice increases yields without increasing the overall quantity of fertilizer used. Rather, some households increase their use of fertilizer while other households decrease their use of the input. We conclude that the scaling of personalized extension services could improve productivity and livelihoods in Sub-Saharan Africa without necessarily increasing the total amount of fertilizer in use.
-
General Equilibrium Impacts in Imperfect Agricultural Markets: Evidence from the Tanzanian Cotton IndustryThis paper evaluates the local-economy general equilibrium effects of agricultural market structures by examining how market power of downstream intermediaries shape the economy-wide impacts of technological improvements in agriculture. Economic impact evaluations in developing countries usually do not include spillovers, and they do not explicitly consider market power. Using industry and original survey data from the Western Cotton Growing Area of Tanzania, I construct an index of oligopsony power of cotton ginners in their cotton purchase, and nonparametrically estimate the index as 0.28. The market power of downstream cotton ginners reduces cotton prices by 33-45 percent. A parametrized general equilibrium model of a cotton-producing local economy using micro-household data shows that a technological improvement in cotton production has significant spillover benefits for households not directly involved in cotton production. Intermediary market power of ginners not only mitigates the direct benefits for poor cotton-producing households but also significantly diminishes the indirect benefits for non-cottonproducing households. The direct income increases of technology improvement for the cotton producers are reduced by 2.2 to 5.6 percentage points, and the indirect income increases for the non-cotton producing households are reduced by 0.5 to 0.8 percentage points. A realistic analysis of policies aimed at raising welfare in rural economies must consider effects of market power. Taking agricultural market structure into account opens up new policy considerations and opportunities, including the benefits of laws limiting or proscribing anticompetitive behavior to prevent formation of mergers and coalitions downstream from farms.
-
On the Distributional Implications of Safe Drinking Water StandardsThe provision of safe drinking water provides a dramatic example of the inherent complexity involved in incorporating environmental justice (EJ) considerations into the implementation and enforcement of new environmental standards. To promote substantive EJ, implementation policy must be concerned with the net risk reduction of new and revised regulations. The regulatory concern is that higher water bills for low-income customers of small public water systems may result in less disposable income for other health-related goods and services. In the net, this trade off may be welfare decreasing, not increasing. Advocates of health–health analysis have argued that the reduction in health-related spending creates a problem for traditional benefit-cost analysis since the long-run health implications of this reduction are not considered. The results of this investigation tend to support this contention. An evaluation of the internal structure of consumption expenditures reveals that the representative low-expenditure household re-establishes equilibrium by not only decreasing housing-related spending, but also by decreasing spending on such health-related items as physician services, eye and dental care, food, and prescription drugs in a modest but significant way.
-
Municipal Water Prices as a Tool for Dynamic Adaptation to Climate VariabilityWater utilities in the southwestern U.S. operate on a limited revenue stream, are expected to encourage water conservation, and are working with increasingly stressed water supplies. Expectations for increased temperatures and more frequent extreme weather events make it important for water utilities to be able to adapt operations and revenue streams to changing conditions. This article draws from multiple examples of strategic price-setting techniques used throughout different industries to encourage specific consumer behaviors and to control revenue outcomes. Using price-setting techniques seen in the electricity and airline industries, this article develops an iterative process for water utilities to strategically set prices for residential water use with the goal of promoting water conservation, stabilizing revenue and making it affordable for all users to meet their basic water needs.
-
Stratifying the Staircase: Residential Water User Segmentation Under Increasing Block Rate Pricing StructureImprovements in residential water efficiency and increasingly stressed water supplies continue to reduce the margin of error in which water utilities are able to operate. Expectations for increased temperatures and the occurrence of extreme weather events increases the need for water utilities to be able to adapt operations to account for changes in the future. This article introduces a probabilistic technique for segmenting single-family residential water users into consumption groups based on consumption behavior and price thresholds imposed by an increasing block rate pricing structure. Strategic segmentation of users allows for more precise analysis of exogenous influences on consumption behavior.
-
The Formative Political Economy of the Central Arizona Groundwater Replenishment DistrictIn 1995 Arizona implemented a set of rules designed to require new development to use “renewable” (non-groundwater) water supplies. Many of the key provisions of the rules were developed by the regulated community itself, including the creation of a legal mechanism— known as the Central Arizona Groundwater Replenishment District—designed to aid compliance with the rules. The District enables developers to pay a small fee to pass the burden of acquiring renewable water supplies for their proposed development to the District. Over the last 15 years, the District has amassed a considerable debt obligation to acquire renewable water supplies on behalf of its thousands of member communities, creating a yet-undefined future water supply acquisition cost for an estimated 200,000 homeowners in central Arizona. This research explores the political economy behind the creation of the District and characterizes its formation using a Nash model of cooperative negotiation with bargaining power.
-
Some Notes on Regression With A Two-Dimensional Dependent VariableThe purpose of these notes is to suggest procedures for dealing with dependent variables in regression models that can be represented as points in the plane. The "trick," if it should be seen as such, is to represent dependent variables in polar coordinates, in which case two-equation models can be specified in which estimation proceeds in terms of functions involving cosines, sines, and radius-vectors. Situations for which this procedure is relevant include analyses of markets in which there are duopoly suppliers. The approach allows for generalization to higher dimensions, and, perhaps most interestingly, can be applied in circumstances in which values of the dependent variable can be points in the complex plane. The procedures are illustrated using cross-sectional data on household toll-calling from a PNR & Associates BILL HARVESTING survey of the mid-1990s and data from the BLS Survey of Consumer Expenditures for the fourth quarter of 1999.
-
A Note on The Harmful Effects of MulticollinearityAssessing the harmful effects of multicollinearity in a regression model with multiple predictors has always been one of the great problems in applied econometrics. As correlations amongst predictors are almost always present to some extent (especially in time-series data generated by natural experiments), the question is at what point does inter-correlation become harmful. Despite receiving quite a bit of attention in the 1960s and 1970s (but only limited since), a fully satisfactory answer to this question has yet to be developed. My own thoughts on the issue have always been that multicollinearity becomes "harmful" when there is an R2 in the predictor matrix that is of the same order of magnitude as the R2 of the model overall. An empirical examination of this "rule-of-thumb," in a stylized Monte Carlo study, is the purpose of this communication.
-
Internal Structure of U.S. Consumption ExpendituresInformation in a household budget survey is usually analyzed in terms of expenditures for different goods and services and how these relate to income, prices, and socio-demographic factors such as age, family size, and education. Allocation of expenditures amongst different categories of consumption is seen as being determined by tastes and preferences acting in conjunction with a constraint imposed by prices and income. The parameters obtained are obviously useful in analyzing the impact on consumption resulting from changes in income and prices (should the latter be available), but income and price elasticities, in themselves, say little about the internal structure of consumption spending. How expenditures for housing and transportation, for example, are related to expenditures for food has, to the best of my knowledge, never a subject of direct empirical study. The investigation is based upon 40 quarterly surveys of consumer expenditures that were conducted by the U. S. Bureau of Labor Statistics from 1996Q1 through 2005Q4. The focus of the analysis is on two large data sets consisting of coefficients obtained from least-squares regression equations, in which each of 14 categories of expenditure is regressed on the expenditures for the other 13 categories and similarly for budget shares.
-
Environmental Quality, Resource Rents and Property RightsThis paper provides a micro foundation for analyzing the relationship between environmental quality and income, by stressing the importance of property rights. The existing literature is prominently represented by the studies on Environmental Kuznets Curve (EKC) and has not examined the manner in which property rights shape the relationship between environmental quality and income. The empirical literature on EKC has typically analyzed the effect of economic growth represented by per capita income on environmental quality represented by air and water pollution. The assumption of exogenously given or perfect enforcement of property rights and use of inadequate definitions of income and environmental quality for mapping their relationship are two of the main limitations of this literature this paper addresses. We develop a model in which property rights to a natural resource stock evolve from a state of open access to more efficient property regime as the price of the resource increases. In our framework, environmental quality is synonymous with the size of the resource stock (stock of clean air and water, groundwater aquifer, stock of trees in a forest, oil reserve in an oil pool) and resource rent is synonymous with income derived from the resource. We show that the relationship between environmental quality and resource rent can evolve in various ways and under certain specific conditions it can also follow a U-shape that is consistent with the EKC. Thus the paper provides an alternative theoretical explanation for EKC based on evolution of property rights without relying on macro growth theory models. We test the model implications using historical case studies of various natural resources.
-
A Brief Look at the Arizona Dairy IndustryThe Arizona Dairy industry has shown strong growth in recent years—4.7% per year since 1990. The number of cows have doubled and milk yield per cow has risen by 25%. Taken together with a 60% reduction of dairy farms, the figures indicate substantial structural changes and concentration in the dairy sector, which is described in the report. Milk processing industries owe their location in Arizona to in-state milk production; a significant share of slaughter-house activity is based on animals from dairy herds, and many supply industries are directly linked with the dairy sector. These dependent industries buy inputs from other businesses, and so on, effects spreading like rings in water. For 2007, the applied input-output model shows that the activity in the combined agro-industrial complex of dairy farms and directly linked processing and supply industries is matched by just about the same derived activity in other parts of the Arizona economy, both in terms of value-added and employment.
-
Asymmetric Information and the Structure of Servitude LawThis article explains the structure of servitudes on land using key ideas from the economics of information. Our focus is on easements and covenants and the rules governing their formation and application. The legal doctrine on servitudes has long been viewed as a Byzantine tangle of doctrine emanating from property law, contract law and courts of equity. We develop a model of land markets that incorporates asymmetric information (adverse selection) and specialization in ownership, and use this to offer a rationale for the seemingly illogical limits on the use of servitudes. Our model uses information costs to explain variations in legal doctrine over time and across space, particularly comparing servitudes in America and in England. An alternative approach to explain servitude doctrine based on the "anticommons," is seen as a special case of the more general problem of information asymmetry arising from measurement costs in land. This is the first paper to model adverse selection issues attached to land law.
-
Customs and Incentives in ContractsThis paper examines customary practices in the context of an incentive model. In particular it examines discreteness in agricultural contracts, and focuses on the distinction between simple cropshare fractions and continuous payments in cash rent contracts. We suggest that the pattern of customary shares is best explained as a response to moral hazard problems spread over large numbers of inputs. A contracting model explains the pattern of shares, the difference in flexibility with cash rent contracts, and the lower bound on shares. Empirical analysis using micro data on over 3,000 contracts are used to test implications of the model. A wide range of support is found for a model based on moral hazard and measurement costs.
-
Effects of the North American Free Trade AgreementThe North American Free Trade Agreement (NAFTA) continues to be controversial. Using an econometric model of import demand and export supply, the effects of NAFTA on bilateral trade between NAFTA partners are estimated. The model accounts for NAFTA effects separately from the impacts of exchange rate movements between NAFTA members, growth in import demand due to changes in gross domestic product, and rest-of-the-world exchange rate effects. Quarterly time series data from 1986 to 2005 are employed. Counterfactual comparisons of model predictions indicate NAFTA has increased bilateral trade between the United States and Mexico. The effects of NAFTA on U.S.-Canadian and Canadian-Mexican trade are mixed and less pronounced.
