IDEAS home Printed from https://ideas.repec.org/a/oup/ajagec/v85y2003i4p857-871.html
   My bibliography  Save this article

The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States

Author

Listed:
  • Jeffrey D. McDonald
  • Daniel A. Sumner

Abstract

Farm programs influence the parameters of typically estimated supply functions. We develop and apply an approach that uses detailed information about farm program incentives and constraints to identify underlying structural acreage response parameters when the data reflect behavior under complex government commodity programs. We illustrate the approach with data on rice acreage response to market price in the United States. For U.S. rice, estimates that fail to appropriately incorporate the program rules under which market data were generated are three to four times smaller than the structural parameters that are useful for most policy analysis or projections under alternative policies. Copyright 2003, Oxford University Press.

Suggested Citation

  • Jeffrey D. McDonald & Daniel A. Sumner, 2003. "The Influence of Commodity Programs on Acreage Response to Market Price: With an Illustration Concerning Rice Policy in the United States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(4), pages 857-871.
    • Handle: RePEc:oup:ajagec:v:85:y:2003:i:4:p:857-871
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/1467-8276.00493
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 43(2), pages 217-235.
    2. Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2007. "Distributional effects of WTO agricultural reforms in rich and poor countries [‘Elasticities of substitution and factor supply in Canadian, Mexican, and US agriculture’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 22(50), pages 290-337.
    3. Tyers, Rod & Anderson, Kym, 1989. "Price elasticities in international food trade: synthetic estimates from a global model," Journal of Policy Modeling, Elsevier, vol. 11(3), pages 315-344.
    4. Charles D. Kolstad & Anthony E. Burris, 1986. "Imperfectly Competitive Equilibria in International Commodity Markets," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 68(1), pages 27-36.
    5. Breusch, T S, 1978. "Testing for Autocorrelation in Dynamic Linear Models," Australian Economic Papers, Wiley Blackwell, vol. 17(31), pages 334-355, December.
    6. D. Gale Johnson, 1975. "World Agriculture, Commodity Policy, and Price Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(5), pages 823-828.
    7. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    8. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 383-406.
    9. Hertel, Thomas W. & Keeney, Roman & Ivanic, Maros & Winters, L. Alan, 2006. "Distributional effects of WTO agricultural reforms in rich and poor countries," Policy Research Working Paper Series 4060, The World Bank.
    10. Just, Richard E & Schmitz, Andrew & Zilberman, David, 1979. "Price Controls and Optimal Export Policies under Alternative Market Structures," American Economic Review, American Economic Association, vol. 69(4), pages 706-714, September.
    11. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    12. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
    13. Alan Love, H. & Rausser, Gordon C., 1997. "Flexible public policy: The case of the United States wheat sector," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 207-236, April.
    14. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    15. Riethmuller, Paul & Roe, Terry, 1986. "Government intervention in commodity markets: The case of Japanese rice and wheat policy," Journal of Policy Modeling, Elsevier, vol. 8(3), pages 327-349.
    16. Goldberg, Pinelopi Koujianou & Knetter, Michael M., 1999. "Measuring the intensity of competition in export markets," Journal of International Economics, Elsevier, vol. 47(1), pages 27-60, February.
    17. Carter, Colin A. & MacLaren, Donald & Yilmaz, Alper, 1999. "How Competitive Is The World Wheat Market?," Working Papers 11973, University of California, Davis, Department of Agricultural and Resource Economics.
    18. Cheng Hsiao, 1997. "Statistical Properties of the Two-Stage Least Squares Estimator Under Cointegration," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(3), pages 385-398.
    19. Carter, Colin A & MacLaren, Donald, 1997. "Price or Quantity Competition? Oligopolistic Structures in International Commodity Markets," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 373-385, August.
    20. Alexander H. Sarris & John Freebairn, 1983. "Endogenous Price Policies and International Wheat Prices," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 65(2), pages 214-224.
    21. Colin Carter & Andrew Schmitz, 1979. "Import Tariffs and Price Formation in the World Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(3), pages 517-522.
    22. Alex F. McCalla, 1966. "A Duopoly Model of World Wheat Pricing," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 48(3_Part_I), pages 711-727.
    23. Chris M. Alaouze & A. S. Watson & N. H. Sturgess, 1978. "Oligopoly Pricing in the World Wheat Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 60(2), pages 173-185.
    24. Gail L. Cramer & Eric J. Wailes & Shangnan Shui, 1993. "Impacts of Liberalizing Trade in the World Rice Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 75(1), pages 219-226.
    25. Shiva S. Makki & Luther G. Tweeten & Mario J. Miranda, 1996. "Wheat Storage and Trade in an Efficient Global Market," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 879-890.
    26. Miljkovic, Dragan, 2004. "Agricultural trade, commodity programs, and income protection in the United States," Journal of Policy Modeling, Elsevier, vol. 26(1), pages 41-46, January.
    27. Cheng Hsiao, 1997. "Cointegration and Dynamic Simultaneous Equations Model," Econometrica, Econometric Society, vol. 65(3), pages 647-670, May.
    28. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    29. Labson, B. Stephen, 1994. "Modeling distortionary aspects of the U.S. wheat program and policy reform," Journal of Policy Modeling, Elsevier, vol. 16(3), pages 237-263, June.
    30. A. P. Lerner, 1934. "The Concept of Monopoly and the Measurement of Monopoly Power," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 1(3), pages 157-175.
    31. Sekhar, C. S. C., 2003. "Price formation in world wheat markets -- implications for policy," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 85-106, January.
    32. Giovanni Anania & Mary Bohman & Colin A. Carter, 1992. "United States Export Subsidies in Wheat: Strategic Trade Policy or Expensive Beggar-Thy-Neighbor Tactic?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 534-545.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boussios, David & Barkley, Andrew, 2014. "Producer Expectations and the Extensive Margin in Grain Supply Response," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(3), pages 1-22, December.
    2. Shepherd, Ben, 2006. "Estimating Price Elasticities of Supply for Cotton: A Structural Time-Series Approach," MPRA Paper 1252, University Library of Munich, Germany.
    3. Alston, Julian M. & Sumner, Daniel A. & Balagtas, Joseph Valdes & Brunke, Henrich, 2004. "Economic Implications Of The Australia-U.S. Free Trade Agreement For U.S. Dairy Markets And Domestic Dairy Farm Programs," 2004 Annual meeting, August 1-4, Denver, CO 20164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Alston, Julian M. & Balagtas, Joseph Valdes & Brunke, Henrich & Sumner, Daniel A., 2006. "Supply and demand for commodity components: implications of free trade versus the AUSFTA for the US dairy industry," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 50(2), pages 1-22, June.
    5. Outlaw, Joe L. & Richardson, James W. & Fumasi, Roland J., 2006. "Lifting the Fruit and Vegetable Cropping Restriction: Potential Impacts on Cropping Preference in the Lower Rio Grande Valley, Texas," 2006 Annual Meeting, February 5-8, 2006, Orlando, Florida 35373, Southern Agricultural Economics Association.
    6. Sumner, Daniel A & Antle, John M & Gardner, Bruce L, 2004. "Contributions of D. Gale Johnson to the Economics of Agriculture," Economic Development and Cultural Change, University of Chicago Press, vol. 52(3), pages 659-679, April.
    7. Key, Nigel D. & Lubowski, Ruben N. & Roberts, Michael J., 2004. "The 1996 Federal Agriculture Improvement and Reform Act: Correcting a Distortion?," 2004 Annual meeting, August 1-4, Denver, CO 20128, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Boussios, David & Barkley, Andrew P., 2012. "Kansas Grain Supply Response to Economic and Biophysical Factors, 1977-2007," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124385, Agricultural and Applied Economics Association.
    9. Murali Adhikari & Krishna Paudel & Jack Houston & James Bukenya, 2008. "Assessing the impacts of stochastic trend in crop acreage supply response model," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 295-302.
    10. Gray, Richard S. & Sumner, Daniel A. & Alston, Julian M. & Brunke, Henrich & Acquaye, Albert K.A., 2005. "Economic Consequences of Mandated Grading and Food Safety Assurance: Ex Ante Analysis of the Federal Marketing Order for California Pistachios," Monographs, University of California, Davis, Giannini Foundation, number 11935, December.
    11. Tatyana Deryugina & Barrett Kirwan, 2018. "Does The Samaritan'S Dilemma Matter? Evidence From U.S. Agriculture," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 983-1006, April.
    12. Catherine Benjamin & Magalie Houée Bigot, 2006. "The impact on yields of arable crops of moving from price support to area payements: A Study of the 1992 CAP Reform: n° 423," Post-Print hal-01931561, HAL.
    13. Lin, William W. & Lucier, Gary, 2008. "Effects of Marketing Loans on U.S. Dry Peas and Lentils: Supply Response and World Trade," Economic Research Report 56454, United States Department of Agriculture, Economic Research Service.
    14. Ahearn, Mary Clare & Collender, Robert N. & Diao, Xinshen & Harrington, David H. & Hoppe, Robert A. & Korb, Penelope J. & Makki, Shiva S. & Morehart, Mitchell J. & Roberts, Michael J. & Roe, Terry L. , 2004. "Decoupled Payments In A Changing Policy Setting," Agricultural Economic Reports 33981, United States Department of Agriculture, Economic Research Service.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Labson, B. Stephen & Rausser, Gordon C., 1992. "Modeling Phased Reduction of Distortionary Policies in the U.S. Wheat Market Under Alternative Macroeconomic Environments," Staff General Research Papers Archive 502, Iowa State University, Department of Economics.
    2. C. S. C. Sekhar, 2010. "Structure of the World Wheat Market: Some Implications for Strategic Trade Policy?," Journal of Quantitative Economics, The Indian Econometric Society, vol. 8(2), pages 142-158.
    3. D. MacLaren, 1991. "Agricultural Trade Policy Analysis And International Trade Theory: A Review Of Recent Developments," Journal of Agricultural Economics, Wiley Blackwell, vol. 42(3), pages 250-297, September.
    4. Reimer, Jeffrey J. & Stiegert, Kyle W., 2006. "Evidence on Imperfect Competition and Strategic Trade Theory," Staff Paper Series 498, University of Wisconsin, Agricultural and Applied Economics.
    5. Thursby, Marie C. & Thursby, Jerry G., 1991. "Strategic Trade Theory and Agricultural Markets: An Application to Canadian and U.S. Wheat Exports to Japan," Occasional Papers 233062, Regional Research Project NC-194: Organization and Performance of World Food Systems.
    6. Krugman, Paul R., 1989. "Industrial organization and international trade," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 20, pages 1179-1223, Elsevier.
    7. Sekhar, C. S. C., 2003. "Price formation in world wheat markets -- implications for policy," Journal of Policy Modeling, Elsevier, vol. 25(1), pages 85-106, January.
    8. Chen, Chi-Chung & McCarl, Bruce A. & Chang, Ching-Cheng & Hsu, Shih-Hsun, 2002. "Spatial Equilibrium Modeling With Imperfectly Competitive Markets: An Application To Rice Trade," 2002 Annual meeting, July 28-31, Long Beach, CA 19687, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Vanzetti, David & Kennedy, John O.S., 1989. "Optimal Retaliation in International Commodity Markets," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 57(01-02-03), pages 1-25, December.
    10. Daniel H. Pick & Timothy A. Park, 1991. "The Competitive Structure of U.S. Agricultural Exports," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 73(1), pages 133-141.
    11. Mccorriston, Steve & Sheldon, Ian, 1989. "Imperfect Competition, Trade Policy and Processed Agricultural Products," Occasional Papers 232831, Regional Research Project NC-194: Organization and Performance of World Food Systems.
    12. Patterson, Paul M & Abbott, Philip C, 1994. "Further Evidence on Competition in the US Grain Export Trade," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 429-437, December.
    13. Stiegert, Kyle W. & Wang, Shinn-Shyr, 2003. "Imperfect Competition And Strategic Trade Theory: What Have We Learned," Working Papers 14589, International Agricultural Trade Research Consortium.
    14. Van der Sluis, Evert, 1988. "A nonlinear multicountry multicommodity spatial equilibrium model with an application," ISU General Staff Papers 1988010108000018153, Iowa State University, Department of Economics.
    15. Anis, Aslam H. & Benarroch, Michael & Wen, Quan, 2002. "Persistent protection in an international exit game," Journal of International Economics, Elsevier, vol. 56(2), pages 465-487, March.
    16. Paulo Bastos & Odd Rune Straume, 2012. "Globalization, product differentiation, and wage inequality," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 857-878, August.
    17. J. Peter Neary, 2009. "Putting the “New” into New Trade Theory: Paul Krugman's Nobel Memorial Prize in Economics," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(2), pages 217-250, June.
    18. J. Peter Neary, 2016. "International Trade in General Oligopolistic Equilibrium," Review of International Economics, Wiley Blackwell, vol. 24(4), pages 669-698, September.
    19. H. Alan Love & Endah Murniningtyas, 1992. "Measuring the Degree of Market Power Exerted by Government Trade Agencies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 74(3), pages 546-555.
    20. Paul Krugman, 2009. "The Increasing Returns Revolution in Trade and Geography," American Economic Review, American Economic Association, vol. 99(3), pages 561-571, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:ajagec:v:85:y:2003:i:4:p:857-871. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.