Production Risk, Farmer Welfare, and Bt Corn in the Philippines

Santi Sanglestsawai,Divina Gracia P Rodriguez,Roderick M Rejesus,Jose M Yorobe

doi:10.1017/age.2017.1

Abstract

We determine the production risk effects and welfare implications of single-trait Bt corn adoption in the Philippines. We use a stochastic production function estimation approach that allows for examining the skewness effects of Bt within a damage abatement specification. Our results indicate that Bt corn has a statistically significant yield increasing, risk-increasing (i.e., variance-increasing) and downside risk-reducing (i.e., skewness-increasing) effects. Based on risk premium, certainty equivalent, and loss probability welfare measures, Bt corn farmers in the Philippines are better-off (in absolute terms) relative to non-Bt farmers given Bt corn's dominant yield increasing effect and downside risk-reducing effect.

Highlights

Insect-resistant crops that have a gene from the soil bacterium Bacillus thuringensis (Bt) are one of the most widely adopted geneticallymodified (GM) crop varieties in the world
As with the results reported above, the results from using full sample in the model suggest that Bt corn has a statistically significant mean-increasing effect, variance-increasing effect and skewnessincreasing effect
We formally test for the equality of the areas under the profit distribution curve to the left of zero for the Bt farmers versus the non-Bt farmers, we find that the difference in the probability of profit loss for Bt versus non-Bt farmers is statistically significant at the 1-percent level

Summary

Introduction

Insect-resistant crops that have a gene from the soil bacterium Bacillus thuringensis (Bt) are one of the most widely adopted geneticallymodified (GM) crop varieties in the world. Given the widespread use of these single-trait Bt crops, there have been studies investigating the yield and insecticide use effects of this Bt technology in both developed and developing countries (See Smale, Zambrano, and Cartel 2007 and Qaim 2009 for a comprehensive review of this literature). These studies found that first-generation Bt crops have yieldincreasing and pesticide-reducing effects. While in countries where pesticide use is typically high, such as China and the United States, the pesticide-reducing effect of Bt cotton is much more dominant than the yieldincreasing effect (Falck-Zepeda et al 2000, Huang et al 2002). There are only few studies examining the effects of Bt corn, the existing literature shows similar yield-increasing and insecticide-reducing effects, albeit with a smaller magnitude (Brookes and Barfoot 2005, Fernandez-Cornejo and Li 2005, Gouse et al 2006, Yorobe and Quicoy 2006, Qaim 2009, Nolan and Santos 2012, Shi, Chavas, and Lauer 2013)

Objectives

Results

Conclusion