Agricultural Economics 25 (2001) 137–140

Editorial

Increasing efficiency in production, research,markets and environmental management

This selection of 22 of the best contributed papers,plus one plenary paper, from the XXIV IAAE Confer-ence in Berlin is in the end a personal one, althoughthe papers have gone through at least three and in somecases four separate reviewing processes. Altogether131 contributed papers were presented, and many fineones have had to be omitted from this collection. Someof these will be included in the Conference Proceed-ings volume, edited by George Peters, to be publishedby Ashgate.

One theme, which links many of the papers, is thatof youth. A significant number of papers are eithersolo or with their supervisors by recent Ph.D. grad-uates. For the first time, a competition for the bestcontributed paper was conducted during the Berlinconference. From a three-stage blind selection pro-cess, three papers by new recruits to the agriculturaleconomics profession emerged for final judging ina plenary presentation. The winning paper by RinkuMurgai is an innovative re-consideration of produc-tivity growth in Indian agriculture before, during,and after the Green Revolution period. It is a paperwhich links to a theme joining many of the papers,namely, what to include and exclude when measuringresearch returns, productivity and efficiency change— of which more are given below.

The other two winners were (a) Manitra Rako-toarisoa with Shahla Shapouri in a paper on “MarketPower and Pricing of Commodities from DevelopingCountries: The Case of U.S. Vanilla Bean Imports”,and (b) Tancrède Voituriez with a paper on “WhatExplains Price Volatility Changes in CommodityMarkets? Answers from the World Palm Oil Market”.

These are linked to a number of other papers thatdeal with the analysis of market efficiency and pricebehaviour. Other topic areas covered in this collec-tion are the economics of reducing insecticide use,biotechnology, and agricultural development.

The dominant theme of the papers presented hereis that of the need for more careful measurement. Itis all very well having elaborate theories and ways ofimposing these on estimation, but if the underlyingmeasurement procedures are incomplete or faulty, theresults obtained can be misleading. This agenda iswell set out in the first paper by Julian Alston andPhilip Pardey concerning “Attribution and other prob-lems in assessing the returns to agricultural R&D”.Alston and Pardey have a long history of research inthis field, and have provided a wide ranging reviewof the measurement problems that might account foroverestimation of the economic returns to research.They start out by noting that care must be taken ininterpreting the internal rates of return generated bythis branch of analysis, since the high rates estimatedin many such studies would imply totally implausi-ble total economic benefits from investing in R&Dover the long and even medium runs. They then ex-amine potential sources of bias due to misattributionof research costs, and identify sources of streams ofimproved productivity which should be costed intothis form of analysis. They also review problemsof attribution over time, and use a meta-analysis toassess the effects of assuming alternative functionalforms and lag structures on the estimated relation-ship between R&D investment and the stream ofbenefits.

0169-5150/01/$ – see front matter © 2001 Elsevier Science B.V. All rights reserved.PII: S0169 -5150 (01 )00071 -8

138 Editorial / Agricultural Economics 25 (2001) 137–140

The ‘attribution’ issue is taken up in other papers.Robert Townsend and Colin Thirtle argue that failure toaccount for the fact that much livestock health researchis needed to, in effect, simply stand still and counterthe damaging effects of disease mutation, means thatthe benefits of livestock R&D are systematically un-derstated. They convincingly argue this with referenceto livestock research in South Africa.

Whereas most evaluations of R&D are conductedex post, Cesar Falconi, Steven Omamo, Guy d’Ieteren,and Fuad Iraqi present an ex ante assessment of abiotechnological research programme to improve live-stock resistance to Trypanosomosis in Africa. Theirappraisal of the potential rate of return to investmentin a specific biotechnological research approach tothis problem is of high rates of return. In relation tothe attribution issue raised by Alston and Pardey, thisprompts the reflection that marginal returns to new ap-plications of R&D techniques are likely to be higherthan average returns which carry the costs of basic re-search and long lead times.

Matin Qaim also presents the results of an ex anteappraisal of two different biotechnological researchprogrammes directed at sweet potatoes in East Africa.Again the estimated social returns are high. However,in this case the research is proceeding on the basis ofdonations of technological expertise by a private sec-tor company, which will not itself benefit directly, fi-nancially from this research. The returns which couldbe captured by a private research venture are not suchas to induce a private investment. The paper’s messageis that for this type of research in future, which coulddeliver significant benefits to consumers and produc-ers of what is a minor crop on the global scale, thepublic sector cannot rely on corporate altruism, butwill have to invest more. In a related vein, the questionof “Private R&D Investment in Agriculture: The Roleof Incentives and Institutions” is taken up by OscarAlfranca and Wallace Huffman. They present econo-metric analysis for seven EU countries to indicate thatincentives, such as contract enforcement and strongerpatent rights, lead to larger private R&D.

Rinku Murgai re-examines the conclusions of pre-vious analyses, that productivity growth in the Pun-jab was relatively low during the Green Revolutionperiod (1966–1974). She argues convincingly thatconventional estimates of total factor productivity arebiased downwards, because some of the contribution

of labour and land saving technologies is attributedto factor accumulation. That is to say, there has beenmeasurement and attribution bias. Consequently, theconclusion reached is that productivity growth was infact high during 1966–1974, but that, in contradictionto previous estimates, productivity has subsequentlyfallen.

The issue of appropriate indexation proceduresin productivity measurement is also considered byAtakelty Hailu and Terrence Veeman in relation to theCanadian pulp and paper industry, where changes inenvironmental impact need to be considered. Theycompare four alternative methods of productivitymeasurement, and argue that the distance functionapproach is best suited in this case to take account ofreductions in polluting emissions, and thus to elimi-nate underestimation of productivity growth. AnotherCanadian paper concerning reductions in pollutantsis that of Cher Brethour and Alfons Weersink. Ap-parently there have been significant reductions in theamounts of high risk chemical constituents in agri-cultural insecticides since 1983 in Ontario. Usingdetailed breakdown on active constituents and esti-mates of willingness to pay for risk reduction, theygenerate social values of the reduced risks.

Valuing reductions in pesticide use is also the sub-ject of a paper by Leah Cuyno, George Norton andAgnes Rola. They use a pesticide scoring system tovalue reductions in pesticide applications resultingfrom an integrated pest management scheme in thePhilippines. As with the Brethour and Weersink paper,they obtain contingent valuations of a range of risks(to human health, aquatic species, insects, mammalsand birds) by specific insecticides. The authors believethat their estimated annual social benefit of over $ 30per person may be an underestimate of the true value.

Underlying the Alston/Pardey review of esti-mates of rates of return to investment in researchis a meta-analysis of the results of 292 studies. Ab-dourahmane Thiam, Boris Bravo-Ureta and TeodoroRivas apply a similar meta-analysis to 51 estimatesof technical efficiency to test whether the methodol-ogy chosen has a statistically significant impact onthe estimate. Using Tobit analysis they conclude thatfactors such as primal versus dual approaches andthe numbers of fixed and variable inputs increaseaverage technical efficiency estimates. On the otherhand, using the Cobb–Douglas functional form and

Editorial / Agricultural Economics 25 (2001) 137–140 139

cross-sectional data is associated with lower estimatesof technical efficiency. Thus, both this and the Al-ston/Pardey paper provide useful guidance for futureresearch on these heavily studied subjects.

One of the themes of the Berlin Conference was‘Innovation’, and one paper which presents a trulyinnovative technology is that of Thomas Berger.His paper summarises the application of a spatialmulti-agent programming model, using what hecalls a “multi-agent/cellular automata approach” tomodel the interaction between irrigation and struc-tural change in a farming area of Chile. Limitationsof space only permit the reader to gain a partial in-sight into the methodology, which combines detailedecological GIS data with heterogeneous assumptionsabout the behaviour of individual farm agents. Whatis striking is the way in which the model endogenisesland transfers and water trades, and produces a dy-namic projection of structural change. It would appearto be a demanding methodology, but appears to bemore flexible than other approaches to bio-economicmodelling, and is one which deserves furtherevaluation.

Another totally different type of paper dealing withinnovation is that of Abdul Bayes, which tells a re-markable story concerning the impact of introducingcellular mobile phones into villages in Bangladesh.The phones are provided on credit to women saverswith the Grameen Bank, and this is the tale of yet onemore impressive element of that institution’s work.The women owners hire out the phones to users, andderive sufficient incomes from this on average to makeuseful supplements to family incomes, while at thesame time enhancing the position of women generallyin the villages. The technological leap from no tele-phones in villages to cellular phones is shown to havemultiple positive impacts.

Takeshi Sakurai and K. Palanisami’s paper onchoice between a common form of irrigation man-agement (by tank) and a private one (by tubewells)in Tamil Nadu is innovative for a different reason,namely, that it was the only paper presented at theconference which uses game theory. His conclusion isthat producers will in effect play the “chicken game”,so that although tube wells are the most costly formof irrigation, most will invest in them, while continu-ing to use cheaper communally provided tank water,if others manage it.

A collection of four excellent papers deal with mar-ket and price behaviour. These include the two runnersup in the best contributed paper competition. ManitraRakotoarisoa and Shahla Shapouri consider “MarketPower and Pricing of Commodities from DevelopingCountries: The Case of US Vanilla Bean Imports”.The vanilla bean market is dominated by the US andthe EU, which import 85% of all vanilla beans worldwide. The countries producing the beans are mainlysmall ones struggling to develop, and for some ofthem vanilla beans are a major export. Many of themhave been advised to devalue their currencies at vari-ous times. The paper sets out to test whether this hasworked fully to their advantage, in the sense of in-creasing the local currency price of vanilla beans ex-ports by the percentage devaluation. The conclusionis that it has not, and that US importers have beenable to take advantage of exchange rate depreciationsor devaluations by using market power to force downthe dollar price paid.

Tancrède Voituriez presents an analysis of “WhatExplains Price Volatility Changes in CommodityMarkets? Answers from the World Palm Oil Market”,using an unusually long time series running from1818 to 1999. He develops a simulation model ofchanging trading behaviour (to reflect growing shorterdistance trade within Asia) and tests the ability ofthis to explain the actual changes in palm oil pricevolatility. His conclusion, contrary to what are prob-ably normal expectations, is that the expansion ofthe market through the expansion of shorter distancetrading has, if anything, increased price volatility.

Eleni Gabre-Madhin, also uses simulation method-ology to assess “The Role of Intermediaries (brokers)in Enhancing Market Efficiency in the Ethiopian GrainMarket”. She develops a model of how traders searchto match positions both with and without brokers. Us-ing survey data for the trading details and transac-tion costs of 169 wholesale grain traders and brokers,numerical analysis with GAMS is used to solve fortraders’ optimal search solutions under different sce-narios. The main conclusion is that the presence ofbrokers reduces divergence from the socially optimalstrategies of the economic actors involved.

Taiwan derives all of its substantial imports of maizefrom the US which exposes importers to both priceand exchange rate change risk. While the former canbe hedged on the Chicago futures market, there is no

140 Editorial / Agricultural Economics 25 (2001) 137–140

futures contract in the Taiwanese–US dollar exchangerate, and thus, no direct way of hedging the latter.The paper of Kang Liu, Jerome Geaun and Li-FenLei examines this problem by developing a modelto simulate whether risk can be reduced by hedg-ing in one of a number of currency futures marketsor through forward contract. The conclusion is posi-tive on this score, with the Deutsch mark–Dollar fu-tures contract being optimal to reduce exchange raterisk.

Two papers are included which deal with foodsecurity issues in Asia. Dina Umali-Deininger andKlaus Deininger examine India’s policies for pro-viding emergency and subsidised staples to the poor.They argue that even with the 1997 reforms, whichintroduced the Targeted Public Distribution system,the problems of efficiently targeting assistance remainlargely unresolved, and that the systems in place areinefficient and costly. They set out proposals for fur-ther reform, central to which is expanding the roleof the private sector, and curtailing that of the publicsector. For anyone lecturing on food policy issues,the paper is particularly interesting for confirming theextent to which all the traditional forms of state inter-vention in grain markets and distribution still operatein India.

Carlo del Ninno and Paul Dorosh also considerthe relative roles of the private and public sectorsin their paper “Averting a Food Crisis: Private Im-ports and Public Targeted Distribution in Bangladeshafter the 1998 Flood”. Through a household survey,their analysis demonstrates the relative effectivenessof a number of emergency and longer term food re-lief schemes to target the poor in the wake of the“flood of the century”. They argue that the resul-tant food emergency was less severe than might havebeen expected because trade liberalisation betweenBangladesh and India enabled the private sector to re-spond rapidly. This minimised the need for state agen-cies to manage food aid, although they did performan important supplementary role in targeting the mostvulnerable.

Issues of food safety and animal disease are cur-rently at the top of the European agenda, and particu-larly so in the UK. Tim Lloyd, Steve McCorriston, WynMorgan, and Anthony Rayner consider “The Impactof Food Scares on Price Adjustment in the UK BeefMarket”. They apply co-integration methods to exam-

ine the impact of a “food publicity index” on monthlybeef price data for the period 1990 to late 1998, atthe retail, wholesale and producer levels. A major ob-jective is to consider how the market power of thelarge retail suppliers interacts with negative publicityshocks. Their conclusion is that this market power re-sults in a disproportionate amount of any price shockfalling on producer prices.

In a similar vein, Wim Verbeke and Ronald Ward usean almost ideal demand (AIDS) model to study theimpact of TV news coverage (of largely health scareproblems, and hormone residues) and of advertisingon the demand for fresh meat in Belgium. They con-clude that price responsiveness is inelastic comparedto the large impacts of television publicity, which areshown to have been particularly negative on beef andveal expenditures, with positive consequences on porkexpenditure. In comparison, and given relatively lit-tle investment in it, fresh meat advertising is found tohave only minor impacts.

Few papers were presented in Berlin on the EU’sCommon Agricultural Policy or WTO issues andonly one paper on this topic area is presented inthis selection. That paper is by George Philippidisand Lionel Hubbard on “The Economic Cost ofthe CAP Revisited”. Their analysis is conducted byComputable General Equilibrium Analysis using theGTAP model. What is different about this analysisis a modification of standard analysis to allow fora nationally-based differentiation of food productsto reflect national preferences in consumption. Thisis incorporated in the model by allowing imperfectcompetition in the non-primary sectors to permit hi-erarchical expression of preferences. Their results arethat free trade (CAP abolition in 2005) would leadto losses in hierarchical utility through reductionsin product diversity, something not allowed for inprevious analyses, and would lead to only small eco-nomic welfare gains. These are estimated to be worth0.19% of GDP for the EU-15 and 0.56% for theUK.

David Colman (Guest Editor)University of Manchester

School of Economic StudiesManchester M13 9PL, UK

Tel.: +44-1612754978; fax: +44-1612754938E-mail address: msassir2@man.ac.uk (D. Colman)