SABIIA - Sistema Aberto e Integrado de Informação em Agricultura (Sabiia)

Kurkalova, Lyubov A.; Kling, Catherine L.; Zhao, Jinhua.

Due to payoff uncertainties combined with risk aversion and/or real options, farmers may demand a premium in order to adopt conservation tillage practices, over and above the compensation for the expected profit losses (if any). We propose a method of directly estimating the financial incentives for adopting conservation tillage and distinguishing between the expected payoff and the premium of adoption based on observed behavior. We find that the premium may play a significant role in farmers' adoption decisions. Even for non-adopters, conservation tillage provides a higher payoff than does conventional tillage on average, as agronomists have argued. However, non-adopters do not use conservation tillage because the expected profit gain alone does not fully...

Suggestions for the Road to Copenhagen

Palavras-chave: Land Economics/Use.

Ano: 2001

URL: http://purl.umn.edu/20542

Karp, Larry S.; Zhao, Jinhua.

We provide a unified discussion of the issues that confront negotiators of the next international climate agreement. We offer a novel proposal that entitles countries to discharge their treaty obligations by paying a “fine”. This escape clause provides cost insurance, simplifies the problem of enforcing compliance, and increases incentives to participate in the agreement. We explain why developed country obligations should rely on a cap and trade commitment rather than carbon taxes. A Central Bank maintains stability of carbon prices by defending a price ceiling and floor. An so-called intensity target is not a good alternative to an emissions cap. Modest trade restrictions, consistent with WTO law, will form an important part of the next agreement....

MULTIPLE BENEFITS OF CARBON-FRIENDLY AGRICULTURAL PRACTICES: EMPIRICAL ASSESSMENT OF CONSERVATION TILLAGE

Palavras-chave: Kyoto protocol; Escape clause; Emissions trade; Taxes versus cap and trade; Price stability; Carbon leakage; Trade restrictions; Differentiated responsibility; Clean development mechanism; Sectoral agreements; Demand and Price Analysis; Environmental Economics and Policy; Research Methods/ Statistical Methods; Resource /Energy Economics and Policy; Q54; Q58; F13.

Ano: 2009

URL: http://purl.umn.edu/51610

Kling, Catherine L.; Kurkalova, Lyubov A.; Zhao, Jinhua.

In this study, we estimate empirically the multiple benefits of a subsidy policy that would offer payments to farmers in return for the adoption of conservation tillage and compare the outcomes of alternative targeting designs for such a policy. Using data for roughly 12,000 National Resource Inventory (NRI) points, we simulate for the state of Iowa the least-cost policy schemes for offering payment incentives. We use an economic model of conservation tillage adoption to evaluate the costs of adoption, and we use a model that simulates physical processes (Environmental Policy Integrated Climate, or EPIC) to estimate the environmental benefits of adoption at each of the NRI points. We assess the costs and environmental consequences of two targeting...

A Proposal for the Design of the Successor to the Kyoto Protocol

Palavras-chave: Conservation tillage; Multiple benefits; Subsidy policy; Targeting; Environmental Economics and Policy.

Ano: 2003

URL: http://purl.umn.edu/18470

Karp, Larry S.; Zhao, Jinhua.

The successor to the Kyoto Protocol should impose national ceilings on rich countries’ greenhouse gas emissions and promote voluntary abatement by developing countries. Our proposal gives signatories the option of exercising an escape clause that relaxes their requirement to abate. This feature helps to solve the participation and compliance problems that have weakened the Protocol. We support the use of carefully circumscribed trade restrictions in order to reduce the real or perceived problem of carbon leakage.

Conservation Payments: Challenges in Design and Implementation

Palavras-chave: Kyoto protocol; Escape clause; Emissions trade; Clean development mechanism; Environmental Economics and Policy; Resource /Energy Economics and Policy; Q54; Q58; F13.

Ano: 2008

URL: http://purl.umn.edu/42878

Babcock, Bruce A.; Beghin, John C.; Duffy, Michael D.; Feng, Hongli; Hueth, Brent; Kling, Catherine L.; Kurkalova, Lyubov A.; Schneider, Uwe A.; Secchi, Silvia; Weninger, Quinn; Zhao, Jinhua.

As Congress develops new farm legislation, some are lobbying for a new partnership between U.S. taxpayers and farmers. In exchange for an annual transfer of $10 to $20 billion from taxpayers to agriculture, farmers would do much more to enhance environmental quality. An attractive feature of a new partnership is that paying for an improved environment provides a clear and justifiable rationale for farm program payments, something that is lacking under current farm programs. By changing management practices and land use, farmers can provide cleaner water, cleaner air, better wildlife habitat, lower net greenhouse gas emissions, and improved long-run soil quality. Private profit maximizers largely ignore the value of these environmental goods. Hence, the...

Real Options and the WTP/WTA Disparity

Palavras-chave: Land Economics/Use; Resource /Energy Economics and Policy.

Ano: 2001

URL: http://purl.umn.edu/36920

Zhao, Jinhua; Kling, Catherine L..

We present a real options model of an agent's decision to purchase or sell a good under conditions of uncertainty, irreversibility, and learning over time. Her WTP and WTA contain both the intrinsic value of the good and an option value associated with delaying the decision until more information is available. Consequently, the standard Hicksian equivalence between WTP/WTA and compen-sating and equivalent variation no longer holds. This helps to explain the WTP/WTA disparity often observed in laboratory experiments and surveys because subjects may have limited learning time and opportunities, thus generating option values. In contrast, the disparity may decrease or disappear entirely in real markets since agents are free to choose when to stop gathering...

RURAL LABOR MIGRATION: Migrant Network, Information, and Hysteresis

Palavras-chave: Research Methods/ Statistical Methods; D60; D83; C90.

Ano: 1998

URL: http://purl.umn.edu/18416

Zhao, Jinhua.

We investigate a rural household's decision to migrate part or all of its labor to urban areas. Labor migrates only when the expected return passes a hurdle rate that is affected by migration networks. We develop a dynamic model of incomplete information, and characterize the unique pure strategy perfect Bayesian equilibrium. Based on the predictions of the equilibrium, we develop a set of econometric models to estimate the migration decisions. Our results show that more current information helps migration, while the expectation of more information in the future may higher migration.

Switching to Perennial Energy Crops under Uncertainty and Costly Reversibility

Palavras-chave: Labor and Human Capital.

Ano: 2004

URL: http://purl.umn.edu/19990

Song, Feng; Zhao, Jinhua; Swinton, Scott M..

We study a farmer’s decision to convert traditional crop land into growing dedicated energy crops, taking in account sunk conversion costs, uncertainties in traditional and energy crop returns, and learning. The optimal decision rules differ significantly from the expected net present value rule, which ignores learning, and from real option models that allow only one way conversions into energy crops. These models also predict drastically different patterns of land conversions into and out of energy crops over time. Using corn-soybean rotations and switchgrass as examples, we show that the model predictions are sensitive to assumptions about stochastic processes of the returns. Government policies might have unintended consequences: subsidizing conversion...

Alternative Green Payment Policies When Multiple Benefits Matter

Palavras-chave: Real options; Irreversibility; Sunk costs; Land conversion; Biofuel; Cellulosic biomass; Dynamic modeling; Stochastic process; Biofuel policy; Land Economics/Use; Resource /Energy Economics and Policy; Risk and Uncertainty; Q42; Q24.

Ano: 2009

URL: http://purl.umn.edu/56195

Zhao, Jinhua; Kurkalova, Lyubov A.; Kling, Catherine L..

This study investigates the environmental impacts of several forms of policies that offer farmers subsides in return for the adoption of conservation tillage. The policies differ as to whether the tillage practice or one of several environmental benefits is targeted. We develop an Environmental Lorenz Curve which fully represents the performance of the targeting policies, and show that this curve can be directly used to help select the optimal targeting strategy for special classes of social welfare functions. The model is applied to the state of Iowa.

Tipo: Journal Article

Palavras-chave: Environmental Economics and Policy.

Ano: 2004

URL: http://purl.umn.edu/31378

Willingness-to-Pay, Compensating Variation, and the Cost of Commitment

Zhao, Jinhua; Kling, Catherine L..

We present a dynamic model of an agent's decision to purchase or sell a good under conditions of uncertainty, irreversibility, and learning over time. Her WTP contains both the intrinsic value of the good and a commitment cost associated with delaying the decision until more information is available. Consequently, the standard Hicksian equivalence between WTP/WTA and compensating and equivalent variation no longer holds. This finding has important practical implications as it implies that observed WTP values are not always appropriate for welfare analysis.

Carbon Sequestration in Agriculture: Value and Implementation

Palavras-chave: Demand and Price Analysis; D60; D83.

Ano: 2000

URL: http://purl.umn.edu/18357

Feng, Hongli; Zhao, Jinhua; Kling, Catherine L..

We investigate the value of carbon sequestration in a dynamic model, demonstrating that it is only a fraction of the value of emission abatement unless the sequestration, the natural decay rate of carbon and the discount rate. We also show that to optimally reduce the carbon stock, sinks should be utilized as early as possible. Further, we propose and assess three mechanisms to efficiently introduce sequestration into a carbon permit trading market, a pay-as-you-go system. We show that, although the three mechanisms may not be equally feasible to implement, they are all efficient.

Towards Implementing Carbon Markets in Agriculture

Palavras-chave: Environmental Economics and Policy.

Ano: 2000

URL: http://purl.umn.edu/18380

Feng, Hongli; Zhao, Jinhua; Kling, Catherine L..

Rational Exaggeration in Information Aggregation Games

Palavras-chave: Environmental Economics and Policy.

Ano: 2000

URL: http://purl.umn.edu/18331

Rausser, Gordon C.; Simon, Leo K.; Zhao, Jinhua.

This paper studies a class of information aggregation models which we call “aggregation games.” It departs from the related literature in two main respects: information is aggregated by averaging rather than majority rule, and each player selects from a continuum of reports rather than making a binary choice. Each member of a group receives a private signal, then submits a report to the center, who makes a decision based on the average of these reports. The essence of an aggregation game is that heterogeneous players engage in a “tug-of-war,” as they attempt to manipulate the center’s decision process by mis-reporting their private information. When players have distinct biases, almost of them rationally exaggerate the extent of these biases. The degree of...

Common Ground Between Free-Traders and Environmentalists

Palavras-chave: Information aggregation; Majority rule; Proportional representation; Mean versus median mechanism; Strategic communication; Incomplete information games; Strategic information transmission; Research Methods/ Statistical Methods; F71; D72; D82.

Ano: 2008

URL: http://purl.umn.edu/43976

Karp, Larry S.; Sacheti, Sandeep; Zhao, Jinhua.

We use a North-South model with property right differences and resource dynamics to study the effects of trade on resource use and welfare. Autarky is likely to Pareto-dominate free trade in the long run when the environment is quite fragile, and the result is reversed when the environment is quite resilient. Trade may cause an environmentally poor country to drag down" its richer trading partner; in this case, both countries degrade their stocks when these would be preserved under autarky. Alternatively, trade may enable the environmentally richer country to pull up" its partner; in this case both countries preserve their stocks when these would be degraded under autarky. These results rationalize the positions of environmentalists and free-traders. The...

GREEN SUBSIDIES IN AGRICULTURE: ESTIMATING THE ADOPTION COSTS OF CONSERVATION TILLAGE FROM OBSERVED BEHAVIOR

Palavras-chave: Environmental Economics and Policy; D5; F1; O2; Q2.

Ano: 1999

URL: http://purl.umn.edu/25042

Kurkalova, Lyubov A.; Kling, Catherine L.; Zhao, Jinhua.

Because of payoff uncertainties combined with risk aversion and/or real options, farmers may demand a premium in order to adopt conservation tillage practices, over and above the compensation for the expected profit losses (if any). We propose a method of directly estimating the financial incentives for adopting conservation tillage and distinguishing between the expected payoff and premium of adoption based on observed behavior. We find that the premium may play a significant role in farmers' adoption decisions.

INSTITUTIONS AND THE VALUE OF NONPOINT SOURCE MEASUREMENT TECHNOLOGY: CARBON SEQUESTRATION IN AGRICULTURAL SOILS

Palavras-chave: Adoption subsidies; Conservation Security Program (CSP); Conservation tillage; Risk premium; Environmental Economics and Policy.

Ano: 2003

URL: http://purl.umn.edu/18517

Kurkalova, Lyubov A.; Kling, Catherine L.; Zhao, Jinhua.

The development of technologies for accurate field-scale carbon assessment allows the implementation of more efficient policies than can be implemented in their absence. We estimate the value of accurate measurement technology by estimating the gains from implementing a more efficient policy, one that targets carbon reductions at the field scale but requires accurate field-scale measurement technology, relative to a practice-based policy that can be implemented in the absence of such technology. We find large cost savings due to improved targeting of conservation tillage subsidies for the state of Iowa. The cost savings depend significantly on the choice of baseline carbon, while the ability of the government to cost discriminate has little impact on the...

THE WTP/WTA DISPARITY: HAVE WE BEEN OBSERVING DYNAMIC VALUES BUT INTERPRETING THEM AS STATIC?

Palavras-chave: Carbon sequestration; Green payment policy; Value of measurement technology; Environmental Economics and Policy; Institutional and Behavioral Economics.

Ano: 2003

URL: http://purl.umn.edu/18540

Kling, Catherine L.; List, John A.; Zhao, Jinhua.

This study advances, and experimentally tests, a new explanation for the disparity between willingness to pay (WTP) and willingness to accept (WTA)-a dynamic neoclassical theory based on the presence of commitment costs. While to date neoclassical models have not explained the observed data patterns well, we find that the commitment cost theory is able to explain adequately the causes and severity of the WTP/WTA value disparity. In particular, using data gathered from an actual marketplace, even the most stringent of our theoretical conjectures-cases where WTP values are predicted to exceed WTA values-oftentimes are met.

ALTERNATIVE INTERTEMPROAL PERMIT TRADING REGIMES WITH STOCHASTIC ABATEMENT COSTS

Palavras-chave: Field experiment; Neoclassical theory; Willingness to accept; Willingness to pay; WTP/WTA disparity; International Relations/Trade.

Ano: 2003

URL: http://purl.umn.edu/18595

Feng, Hongli; Zhao, Jinhua.

We examine the social efficiency of alternative intertemporal permit trading regimes. Banking with a 1-to-1 ratio and with a non-unitary intertemporal trading ratio (ITR) are compared with each other and with the no-banking permit trading regime. The more industry-wide shocks vary, and/or the more they are negatively correlated across time, the more efficient is a bankable permit regime. When the slope of the benefit function is greater than the slope of the damage function, banking with ITR=1+r is more efficient than a no-banking regime. Banking with ITR=1 can be more efficient than a no-banking regime. However, whether ITR=1 or ITR=1+r is better depends on the covariance structure of the shocks and the benefit and damage functions.

Impacts of Livestock Operations: A Gaussian Dispersion Hedonic Approach

Palavras-chave: Bankable permits; Permit banking; Borrowing; Environmental Economics and Policy.

Ano: 2002

URL: http://purl.umn.edu/18543

Ran, Tao; Zhao, Jinhua.

The paper studies the impacts of livestock facilities on property values, and extends the hedonic housing price models by explicitly modeling the way odor is dispersed in the atmosphere. Using a Gaussian dispersion model of odor, our estimation allows us to separately estimate the environmental effects and other effects, and to evaluate the marginal contributions of livestock facilities depending on their location.

Alternative Land Use Policies: Real Options with Costly Reversibility

Palavras-chave: Land Economics/Use.

Ano: 2005

URL: http://purl.umn.edu/19116

Song, Feng; Zhao, Jinhua; Swinton, Scott M..

This paper adopts a real options framework to evaluate the cost-effectiveness of four types of subsidies that aim to encourage a socially desirable land use under return uncertainties and costly reversibility of land use change. We first present a land conversion model to show how the subsidies that are expected net present value (ENPV) equivalent can change a representative farmer’s optimal land conversion rules differently for converting land into an alternative use as well as converting out of it. This is because these subsidies affect the land conversion costs, land return level and uncertainty differently. Then in the context of encouraging energy crop production, we compare the probabilities of inducing the representative farmer to convert land from...