Economic Studies on Food, Agriculture, and the Environment

Genetically Modified Organisms (GMOs) burst onto the scene in 1996 with the rapid commercial introduction in the United States of genetically engineered corn (maize), cotton, and soybeans. By 1998, more than 500 genetically modified plant varieties were available in the United States, accounting for 28 percent of the areas (2.57 million hectares) planted to maize, soybeans and cotton. Argentina and Canada had each planted an additional 100,000 hectares to GMOs and other countries (South Africa, Spain, France, Mexico, China, Australia, Brazil) had planted less than 100,000 hectares each (James, 1999). Perhaps more significant to consumers, these crops rapidly entered the supply chain for processed foods using corn, soybean, or cotton seed oils, with some estimating that between 70–100 percent of processed foods now contain GMOs (The Economist, 1999).

In response to this rapid expansion, countries have developed diverse regulatory approaches to the production, marketing and development of these products. The US has been a particularly strong advocate for the biotechnology industry in terms of intellectual property protection and limited governmental regulatory oversight in the production and marketing of these products. In contrast, Europe has approached biotechnology with skepticism and has been slow to grant regulatory approval for new products. These differences, which grow out of variations in political, economic and cultural characteristics, have raised challenges for trade, agricultural and consumer policy.

The purpose of this paper is to examine the underlying factors that have contributed to divergent US and European views on GMOs. After a brief overview of the historical and cultural differences dividing US and EU attitudes, we focus primarily on consumer labeling strategies and international trade.

The European Union Directive 44/98 on the legal protection of biotechnological inventions establishes the patentability of products consisting of or containing biological material, and the process by means of which biological materials are produced, processed or used. The member states of the European Union (EU) are required to implement this directive in national law by 30 July 2000.

Rapid economic growth in the 1990s has led to a huge decline in poverty and an increase in household incomes in Vietnam. According to many economists economic growth can further lead to a better nutritional status of a population. Malnutrition rates in Vietnam, in terms of stunting (low height-for-age) in children under 5, have been reduced from 50% in 1992–93 to 34% in 1997–98. Disparities, however, exist between different regions, urban and rural areas, ethnicities and income quintiles. Given this dramatic decline, it is tempting to conclude that the nutritional improvements are due to higher household incomes. This paper therefore attempts to investigate the impact of household income growth on children’s nutritional status in Vietnam. Different estimation methods applied to the 1992–93 and 1997–98 Vietnam Living Standards Survey data find that growth in household expenditures accounts for only a small proportion of the improvements in children’s nutritional status.

This paper reports the initial results of a research program examining the relationship between large retail chains and the certification of quality management systems. The aim is to analyze the role of large retail firms in the development of the ISO 9000 standard model of Quality Management System (QMS) in the agri-food environment, through the pressure exerted by the retailer on its suppliers.

The analysis is based on surveys of the buyers for the main large retail firms in Emilia-Romagna.

The results seem to confirm the positive role of large retail business, but fails to show a clear strategy for these operators in implementing their own QMS. The influence of large scale retailers may be the only factor that will definitely promote a dramatic increase in the adoption of such management systems in the agri-food market.

There is growing interest in vertical integration and supply chain management in the food system. Several dimensions of supply chain performance have been analyzed such as logistic efficiency, quantitative input control, risk reduction. This paper focuses on supply chain design strategies for ensuring food quality. We present a series of brief descriptions of food supply chains in the U.S. and Europe. These help illustrate both the common features and the diversity of emerging supply chains in the food system. We review key theories that can serve as the conceptual foundation for supply chain analysis and design, including transaction cost economics, agency theory, property rights theory, and the resource-based theory of the firm. We assess the usefulness of these theories in explaining similarities and differences in the illustrative supply chains with respect to chain leadership, choice of mechanisms for quality assurance, the distribution of margins among chain participants, and adaptability in the face of change. In our concluding remarks, we look ahead to challenges and opportunities for future work on supply chain design in the food system.

A number of countries face water shortages because they need to make some basic changes in their water management. Policy options do exist. Most of them share the objective of treating water and water services as an economic good, by regulating private inefficient appropriation of open-access resources, and by making the demand for water less independent of users’ willingness to pay for it. The aim of this paper is to provide an overview of these policy options by illustrating their rationale and possible caveats. We begin by stressing the importance of improving countries’ social capital (i.e., institutional arrangements and management rules for allocating water between competitive uses). We then concentrate on some economic approaches to improving water management, i.e., the establishment of water markets and the privatization of water utilities, by focussing on experiences and on-going developments in the United States and the European Union.

The recreational use of agricultural land is emerging as one of the main opportunities for income production and rural development in many rural areas of the world. Many agri-environmental measures are directly aimed at improving the recreational value of rural land through the provision of direct services or landscape improvement.

The aim of this study is to assess the value for the consumers of such recreational improvements. In particular, an assessment was carried out in an area of Bologna Hills in order to evaluate the willingness to pay (WTP) for the provision of a set of given recreational services. The collection of information was achieved through a questionnaire addressed to households living in the Province of Bologna. The information collected includes recreational behaviour of the households, as well as the WTP for the services proposed. Results are discussed in relation to actual policy implementation, comparing recreational benefits with the public expenditure necessary to produce such benefits.

The results show that the provision of recreational goods in the countryside is valued by households as a relevant good, the quality of which significantly affects their behaviour in relation to the use of the countryside. Nevertheless, the WTP is probably not sufficient to fully cover the public expenditure necessary to carry out the proposed intervention. Fine tuning is thus necessary to target intervention, to improve policy efficiency and to create mechanisms for direct payment the services provided.

The paper provides a behavior model of a consumer considering the purchase of a license that allows him to benefit from a natural resource in a certain place, for a certain period of time, and according to pre-established rules and procedures. We developed a model starting from the assumption that the opportunity to purchase a license can be likened to a call option, given that the uncertainty concerning the future benefits and the irreversibility of the expenditure may make it expedient to wait before purchasing. Furthermore, the model includes the main factors conditioning the perceived utility of the recreational activity (i.e. the stock of resources, the number of rivals, and operations designed to enrich/deplete stock levels) with particular attention to the uncertainty that characterizes activities pertaining to biological resources. The first result concerns the effect of uncertainty. It acts as a deterrent to the purchase of the license and lengthens the optimal duration. Generally speaking, therefore, the first tool available to an agency appointed to regulate the purchase of licenses for recreational activities is the quality of the information to be circulated.

A subsequent analysis enabled us to highlight the effect produced by an uncertain sharp change in the stock of resource on the optimal duration of the license. It emerged that, as the discount rate increases, shorter duration is not always favored, as might be expected with the net present value criterion.

Optimal license duration also depends on the elasticity of the supply function: as the elasticity decreases, optimal duration decreases. This highlights a second possibility of intervention for the agency: by modulating the supply function with respect to the duration, it can directly condition consumers’ choices. Finally, irreversibility and uncertainty lengthen the optimal duration of the license, as longer duration reduces the effect of the variability of future benefits.

Recent empirical studies have found that traditional present value models do not adequately represent the process that underlies changes in farmland market prices. We briefly review the existing economic literature on land pricing and then develop a more specific analysis of land prices under uncertainty using a real option approach to valuation. Using the model, we illustrate the effects on farmland prices of factors that represent the major sources of investor uncertainty.

In recent years in Italy, public and private sectors have been stimulated by the National Government to cooperate in urban renewal, thanks to public funds committed through competitive procedure. In 1998, the Ministry of Public Works promoted new Programs for Urban Renewal and Sustainable Regional Development (Italian acronyme: Prusst). This kind of program puts together a package of public and private projects to promote economic and sustainable development. The main axes are networked systems, productive centres, urban rehabilitation and environmental preservation. New attention is given to cooperation and negotiation among local authorities and private operators.

The research deals with a critical analysis for the evaluation methods used to select the projects to include in the programs, with the aim to propose the Community Impact Evaluation (CIE) as a more appropriate method for their evaluation. CIE takes account of the total costs and benefits for the community involved, with particular attention to the impact of such costs and benefits on the various community sectors.

In addition, the authors try to integrate the CIE with other sectoral assessment methods necessary to obtain public funding, such as Social Financial Analysis and Social Impact Assessment. The methodology proposed is finally tested in the program carried out by the towns of Forlì and Forlimpopoli, in the Emilia Romagna region.

The purpose is to define an “accounting” matrix capable of emphasizing the advantages for the public and private sector participating in the program and of selecting a set of projects that, in minimizing negative impacts, respond to efficiency, sustainability and distributive equity criteria.

The structure of U.S. agriculture has been profoundly changed by the growth in specialized production units in animal agriculture, by monoculture and duoculture in field crops, and by increased dependence on export markets. Land use choices are increasingly internationalized, with emphasis shifting from domestic to global markets.

The importance of equity capital in land ownership declines, as emphasis shifts to operating capital, with growing risk exposure by the commercial banking sector. The typical farm now involves both owned and rented land, reflecting heavy migration out of agriculture and parcelization of land ownership.

Traditional family farms, once diversified, participate in specialization by converting to two-earner families, with diversified income sources from both off farm work and non-farm work on the farm. This may prove to be a surprisingly durable transition.

The agricultural industry is in the midst of a major period of structural change creating a great deal of uncertainty for producers concerning the appropriate portfolio of production and marketing activities for the future. Our challenge as academics and advisors of producers is to produce research and educational programs that will assist farmers manage risk and remain competitive in this increasingly dynamic industry environment. We briefly review the current research on risk management, the sources of risk for farmers, and the alternative strategies for farmers to manage and control their exposure to risk. We then describe the current approach to providing educational programs on risk management and the available evidence that farmers are adopting recommended strategies. Our analysis suggests more farmers are adopting tools to shift some of the short-run risk, but that they have been less receptive to adjustments in their strategy to deal with longer-run changes. We also suggest some implications that seem to follow from this overview: (1) extension education programs to assist farmers choose among the crop insurance alternatives seem to be working well, (2) educational efforts on the use of the futures and options markets are being widely accepted and the use of these markets by farmers is increasing, (3) the strategic planning approach has the most potential to help producers evaluate and manage longer-run or strategic risk but educational programs have not been well attended. We suggest three types of assistance to enhance farmer participation in strategic planning: (a) public assessment of the forces driving change and the implications of those changes for farms, (b) provision of efficiency standards or benchmarks to help farmers appraise whether they can compete with other producers, and (c) provision of multiple-day workshops on strategic planning spread over several months to allow time to reflect and prepare for each step in the strategic planning process.

The purpose of this paper is to analyze the Italian rural development experience, emphasizing its strengths and weaknesses on one side, and its peculiarities and possibility of generalization on the other.

Such peculiarities call for a critical appraisal of the main theoretical approaches for the analysis of rural development. For example, a mere sectoral approach — i.e. based on the “rural/urban” dichotomy — does not explain satisfactorily the recent Italian experience, while the “local/regional” approach seems to explain much more. Therefore, an attempt is made to interpret Italian rural development patterns adopting the analytical categories proposed by the Italian school of industrial economics. The two main conclusions are that the development process: (i) is the outcome of the interplay between socio-economic variables, territorial characteristics (that is, history and geography), and institutions, and (ii) doesn’t show a unique sequence, but it can be characterized by a plurality of organizational forms and many different development paths.

Building on this, the paper tries to answer a set of relevant questions. First is whether or not agricultural, agro-industrial, or rural local development systems do exist. If so, how can these constructs help to analyze different development patterns, i.e. how many different “agricultures” do exist in Italy? Having acknowledged this plurality of rural development patterns, and typologies and roles of agriculture within them, a fundamental question is how a given (rural) local development system does change. Different typologies of transformation are proposed (evolution, restructuring and metamorphosis) and critical points for agricultural change dynamics in the Italian context are analyzed. Finally, the consequences for the policy-makers are emphasized, focusing both on alternative strategies for local development policies at large, and for rural development policy in particular.

Rural tourism development is almost as difficult to do right as it is to define what it means. In this paper a number of critical features necessary to successful rural development were examined. Some of the features mentioned such as transportation fall into the domain of the public sector. Others such as human resource training and communication technology may be the responsibility of both the public and private sectors.

A number of tourism trends were examined that relate to rural types of touristic experience. Most of them indicate growth for rural products are on the increase. However a warning sign can be seen as world growth in tourism has created awareness of its beneficial impacts. Many communities are now trying to create their own rural tourism product in order to capture a share of an expanding market. The increased competition requires that communities pay attention to the principles of tourism development if they are to be successful.

The majority of this paper has been devoted to examining ways to increase visitor flows to an area. The negative implications of that action were not discussed in detail but can be devastating for a community unable or unwilling to engage in tourism planning. It is recommended that this paper be viewed as only part of the rural tourism development process. Many more issues need to surface and be discussed before the complete tourism development process for rural destinations can be fully understood.

Market-based mechanism for pollution control are becoming more popular both in the environmental economics literature and in the real-world policymaking. This paper contains a review of the ideas behind these mechanisms. A brief example illustrates the appeal of both effluent taxes and permit-trading schemes, and compares and contrasts the two. This is followed by a review of some of the market-based schemes in use around the world. The paper finishes with a summary of performance in the U.S. sulphur dioxide allowance-trading market.

It has often been recognized that planning and design can play an important role in the achievement of sustainable development of cities. However, problems still exist with regards to both a clear understanding of sustainability in the built environment and a means of evaluating it within the context of urban planning and design.

Planning intervenes have been used to regulate the numerous externalities that characterize cities and regions. Having recognized inefficiency of the authoritative command- and-control tools, some Italian local administrations have been trying to implement and manage urban plans through the use of market-based tools.

The transfer of development rights represent an innovative market-based tool that has created a great interest. Several significant elements emerge from analysis of the major case studies in Italy. For instance, markets for development rights do not replace the command-and-control tools traditionally used in planning. In reality, the success of the new markets seems to depend significantly on their integration with the latter.

In addition to traditional market commodities, agriculture, forestry and the related environment, produce a large set of Environmental Recreational Goods and Services (ERGSs). Examples include pleasant landscapes, rural lanes and footpaths, habitats for various kinds of flora and fauna, grounds for sports and other recreational activities. At the same time agriculture and forestry can produce Environmental Bads and Disservices (EBD). These ERGSs, and EBDs, are generally perceived by our societies as public goods and/or externalities of farming and forestry, as people cannot be excluded from using them and rivalry is not greatly felt; everyone can enjoy and/or suffer from them without any market transaction taking place.

This study is part of a broader research project whose aim is to assess the impacts of the introduction of environmentally sound agricultural techniques in the area of the Trasimeno Lake watershed, in Umbria.

In this chapter the methodological path used in this study is explained. It is composed of different steps, each one of them with a specific methodological core, but all directed to get the same final result.

The first step is the economic and environmental assessment of the production practices at a single crop and farm level, both for the present situation, and for the alternatives (in terms of crops, but also practices) coming from field experimentation. To develop this step the Planetor computer program has been used. The output data from Planetor, together with other indicators, has been incorporated into a multicriteria matrix to get a comparative assessment of the different alternatives.

The second step is the economic and environmental assessment of different scenarios at the whole watershed level. To develop this step a combination of linear programming and multiobjective analysis has been used, to generate the optimal combination of all the different factors.

The third step is the assessment of land vulnerability and environmental risk of the watershed, developed through the implementation of regional environmental data in a Geographic Information System (GIS). The result is a number of vulnerability and risk maps.

A survey was carried out in Vicenza province (Italy) in order to verify the environmental impact of the 1992 reform of the Common Agricultural Policy (CAP), including a series of accompanying agro-environmental measures.

The level of the acts implementation was defined as well as farmers attitude and motivation towards agro-environmental measures.

Results seem to highlight that agro-environmental measures could not be so important in land environmental improvement, especially in the plain as long as more than half of the land receiving subsidies is concentrated in the mountain areas.

Among all the measures, not all of them have received equal attention. Most applications have regarded the measures related to organic farming methods or the reduction in chemical inputs and some improvements to the landscape-environment.

Farmers age seem to be an important parameter in applying Regulation.

The recent regulation 1257/99/EC provides for the funding of new agro-environmental measures, representing the continuation of those introduced by the 1992 CAP reform. Past application of agro-environmental policies raised a large debate about the best way of carrying out the interventions. The definition of payment levels and the setting up of suitable monitoring procedures are two major issues on which a large degree of disagreement still remains.

The objective of this study is the measurement of actual costs for implementing agro-environmental measures and the setting up and testing of a model for the quantification of optimal parameters for agro-environmental policies.

The model is tested on a specific data set related to the application of non-productive measures included in regulation 2078/92/EC and continued in regulation 1257/99/EC in Emilia-Romagna (Italy).

The results show large area for improving the efficiency of application. The work shows that quantifying the payment on the basis of the average compliance cost is not an obvious solution, and, on the contrary, it is normally unable to satisfy efficiency objectives. Instead, many instruments can improve efficiency. In particular, instruments in which payments are conditioned on environmental effects or are proportional to environmental improvements allow important savings for the public administration, through the concentration of participation on farms offering the cheapest environmental improvement. Among such instruments, the use of auctions for contracts appears to be particularly promising for future improvement of policy mechanisms.

The “Crop Economic Analyzer Model” (CEAM) is a decision support system (DSS) for the economic-environmental assessment of agricultural crops, designed to answer both public and private needs. The software attempts to reconcile the demand for an eco-compatible agriculture with the farmers’ need to obtain an adequate return on their investment.

CEAM operates at the crop level, taking into account all the activities required by the production cycle; this permits evaluators to analytically quantify the utilization of raw materials, labor and machinery and their cost.

The program, which operates as a Microsoft Windows® application, consists of three main modules: problem definition, calculation, and report generation. The user interface is highly friendly. The system supports the creation and storage of personalized archives pertaining to specific farm conditions and analyzed scenarios.

It should be emphasized that for some practices, like fertilization, it performs as an expert system, through the internal database on agricultural technologies and regulatory constraints, organized into a comprehensive evaluation process.

At the public level, if adopted by the local authorities for the extension service, it permits the collection of homogeneous data on agricultural practices.

Flexibility coupled with simplicity of use, make CEAM a powerful tool for the guidance and monitoring of agricultural activities.

Noise is one of the most serious forms of pollution and one of the main causes of the deterioration of the quality of life in urban areas. This paper analyzes the effects of traffic noise on house prices in the historic center of Ferrara. The analysis was done by analyzing the distribution of house prices and noise pollution, using multiple regression. This study also demonstrates that the discomfort produced by noise is highly variable and that it increases more than proportionally to the noise produced. There is however a clear and significant negative relationship between the discomfort produced by noise and housing values. Average housing devaluation is 1,900 ITL per percentage point of people disturbed by noise per square meter of surface area. Noise pollution, therefore, clearly affects property values, which in turn legitimizes the recent protective norms for urban environment.