Parity Price Research Articles

Is parity pricing enough? A critical analysis of parity pricing and the case for additional strategies

Producers in the U.S., particularly small-scale farmers and specialty crop growers, are unable to maintain their livelihoods with farming alone. This issue is convoluted by low farm gate prices stemming from the unequal distribution of market share and political support within the U.S. food supply chain. As a result, many farm activists and scholars have recommended a revitalization of parity pricing within U.S. policy. Parity pricing once served to set price floors considered to represent “fair” farm gate prices determined by the farm gate price and purchasing power of commodities during the parity period of 1910–1914. In this paper, we evaluate whether parity did exist during the set period of 1910–1914, showing farm incomes and non-farm incomes were not significantly different from one another during the parity period. We then explore the extent to which parity prices correspond to farm-gate prices, transfer terminal prices, and retail prices for a select group of twelve specialty crops. We show that farm gate prices are significantly lower than parity prices, do not necessarily translate into low prices for consumers, and do not consistently correlate with production costs. Lastly, we display the temporal correspondence between the end of parity pricing and declines in farm income. Our analysis contributes important evidence of the inequalities within production, payment, and pricing structures of specialty crops in the U.S. As such, we provide a critique of parity pricing arguing that parity pricing alone will not be sufficient to solve the complex and deeply rooted issues underpinning low farm gate prices and injustices within the U.S. food system. We conclude with a discussion of the impacts of low farm gate prices and areas for policy interventions.

Price Distortions and Competitiveness of Cotton Production in Pakistan

The research is conducted to determine the cotton price distortions, as well as competitiveness at national and international levels. National competitiveness has been measured by using the nominal protection coefficient (NPC) and benefit-cost ratios for the period 2008-09 to 2018-19. To gauge international competitiveness, trade base indices under the revealed comparative advantage approach are used. A comparison of the international competitiveness of Pakistan with major cotton-exporting countries has also been made. The results of this research revealed that at the national level cotton producers in Pakistan faced implicit taxation for most of the years during the study period, as NPCi averaged at 0.87 as an import substitution crop. Export parity prices were slightly less or equal to the domestic prices by varying degrees as NPCe averaged at 1.06. The production cost grew at the rate of 12.3% per annum, while cotton output prices grew at the rate of 8.4 percent per annum. Consequently, a decrease was registered in the benefit-cost ratio during the study period. Pakistan has experienced comparative and competitive advantage for cotton as indicated by results of revealed comparative advantage (RCA) indices. A comparison of Pakistan’s indices with main exporters/competitors demonstrated that Pakistan has a relatively higher comparative and competitive advantage for cotton. However, Pakistan’s international competitiveness exhibited a declining pattern since 2011-12. This result is consistent with the national level scenarios as the benefit-cost ratio has declined over this period. It can be concluded that productivity growth and a reduction in input costs are needed to improve overall competitiveness in cotton production and trade.

Estimating County-Level Regional Price Parities from Public Data

Estimating County-Level Regional Price Parities from Public Data

Impact of Petrobras' price policy change on the brazilian economy:

This study examines the impacts on Brazilian inflation of the Petrobras price policy adopted in 2017, more specifically the transition to the Import Parity Price (IPP) policy in response to abrupt changes in West Texas Intermediate (WTI) crude oil prices. Using the Vector Autoregression Model (VAR), it is observed that the Petrobras price policy and the IPP, played significant roles in transferring oil price fluctuations to inflation. Prior to the IPP, government interventions strove to curb inflation, with positive impacts on inflation after its adoption. The findings highlight the relevance of reevaluating the Petrobras price ‎ policy in 2023 in order to safeguard the company's interests and underpin the nation’s economic stability. This study contributes to discussions on fuel policies in Brazil and how significantly they affect the transport sector.

Efficiency of the EmERGE Pathway of Care in Five European HIV Centres.

We aimed to calculate the efficiency of the EmERGE Pathway of Care in five European HIV clinics, developed and implemented for medically stable people living with HIV. Participants were followed up for 1 year before and after implementation of EmERGE, between April 2016 and October 2019. Micro-costing studies were performed in the outpatient services of the clinics. Unit costs for outpatient services were calculated in national currencies and converted to US$ 2018 OECD purchasing parity prices to enable between clinic comparisons in terms of outcomes and costs. Unit costs were linked to the mean use of services formedically stable people living with HIV, before and after implementation of EmERGE. Primary outcome measures were CD4 count and viral load; secondary outcomes were patient activation (PAM13) and quality of life (PROQOL-HIV). Out-of-pocket expenditure data were collected. There were 2251 participants: 87-93% were male, mean age at entry was 41-47 years. Medically stable people living with HIVhad outpatient visits in four sites whichdecreased by 9-31% and costs by 5-33%; visits andcosts increased by 8% in one site, which had to revert back to face-to-face visits. Antiretroviral drugs comprised 83-91% of annual costs: the Portuguese site had the highest antiretroviral drug costs in US$ purchasing parity prices. Primary and secondary outcome measures of participants did not change during the study. EmERGE is acceptable and provided cost savings in different socio-economic settings. Antiretroviral drug costs remain the main cost drivers in medically stable people living with HIV. While antiretroviral drug prices in local currencies did not differ that much between countries, conversion to US$ purchasing parity prices revealed antiretroviral drugs were more expensivein the least wealthy countries. This needs to be taken into consideration when countries negotiate drug prices with pharmaceutical vendors. Greater efficiencies can be anticipated by extending the use of the EmERGE Pathway to people with complex HIV infection or other chronic diseases. Extending such use should be systematically monitored, implementation should be evaluated and funding should be provided to monitor and evaluate future changes in service provision.

Identifying possible misspecification in South African soybean oil futures contracts

ABSTRACT With the inclusion of a locally traded soybean oil futures contract, that is dual-listed and cash-settled of the Chicago Board of Trade futures contract, the South African Futures Exchange (SAFEX) aimed to provide local soybean crushing plants, the opportunity for managing their exposure toward the variation in soybean oil prices using effective hedging strategies. Which is only viable assuming adequate liquidity, that is currently lacking in these futures contracts. The soybean oil contract used for hedging local price exposure should also reflect local import parity and/or be correlated to local price movements. Therefore, with most soybean oil usually being imported from Argentina, one would expect SAFEX soybean oil futures contracts to reflect the cost of imported soybean oil from Argentina. Hence, the research study used the Engle–Granger (1987) cointegration approach, alongside a range of diagnostic tests to determine whether SAFEX soybean oil futures contracts, that is dual-listed and cash-settled of CBOT settlement values is a misspecification and whether or not SAFEX soybean oil futures contracts should rather be based on the Argentina free-on-board soybean oil prices which is a much better representation of South Africa’s import parity and local industry prices.

Analysis of Hydrous Ethanol Price Competitiveness after the Implementation of the Fossil Fuel Import Price Parity Policy in Brazil

Competition is a relevant element in any open economy. Public policies are necessary to induce economic efficiency and to create conditions to preserve or stimulate a competitive environment. This paper aims to assess the competitiveness of hydrous ethanol price in a period of political, social and economic crises, in 15 Brazilian state capitals between the years 2012 and 2019. We compared the ethanol–gasoline price ratio behavior in two different periods, before and after the import parity price policy implemented by Petrobras in 2016. Mann–Whitney and Levene’s tests, two non-parametric statistical methods, were applied to verify significant changes between these periods. The implementation of changes in Petrobras’ pricing policy from 2016 onwards caused a statistically significant increase in the ratio coefficient of variation in two-thirds of the distribution market and more than the half of analyzed retail markets. Second, overall, the cities that showed statistically significant changes in the median and coefficient of variation in the distribution market price ratio were followed by the retail market. Our findings suggest that government interventions in the fuel and byproduct final selling prices to distributors negatively impact competition between companies that are part of the fuel distribution and retail chain, also affecting the sale of biofuels in Brazil and discouraging the initiatives to use renewable fuels to reduce the emission of pollutants.

Productivity and Competitiveness of Garlic Production in Pasuquin, Ilocos Norte, Philippines

A total of 124 garlic farmers were selected and interviewed to evaluate the productivity and competitiveness of garlic farming in Pasuquin, Ilocos Norte, Philippines. The Technical efficiency (TE) was estimated using a stochastic frontier analysis or SFA based on the Cobb-Douglas production functional form, while the competitiveness of local garlic production was determined based on the ratio between import parity price and domestic resource cost ratio. The mean TE was 81 percent while the estimated gamma value was 0.92. These values indicate that 92 percent of the variation in garlic output is due to inefficiency factors and that total garlic output can further be increased with efficient use of resources. The analysis further revealed that seed rate and insecticides were statistically significant production factors. The results also show that group membership, farm size, and distance to the farm-to-market road (FMR) were statistically significant. Inefficiency factors and distance to the FMR have positive relationships while group membership and farm size have negative relationships with the garlic output. Price and cost ratios show that garlic from Pasuquin, Ilocos Norte could not yet compete with imported garlic from China in 2018. However, simulations show that if the Philippines can increase its national average by at least 20 percent (4.08 mt/ ha), it can have a competitive advantage in garlic production. The results of the analyses highlight the need to revisit the output and input policies and programs of the government to increase the productivity and competitiveness of garlic farming in Ilocos Norte. These programs include investing in quality seed, joining farmers’ organizations, and providing better farming infrastructure.

Implementation of a Circular Economy in Ukraine: The Context of European Integration

The current model of resource management mainly contributes to mass short-term consumption, which creates an unstable and extremely critical situation on the planet. Going beyond the traditional industrial model of Take-Make-Waste, the circular economy aims to reduce waste (and therefore minimize costs) and to redefine sustainable development. This entails a gradual separation of economic activity from the consumption of scarce resources and the removal of waste from the system. In order to foreground the principles of a circular economy in Ukraine, this study analyzes its benefits based on the relevant experience of the EU. The paper also presents the results of research and content analysis on the situation of waste management in Ukraine and compares the trends using key indicators. The core of the paper is developing a conceptual model of making and coordinating management decisions on the implementation of business projects in the context of a circular economy in Ukraine. A multifactor model (the Farrar–Glauber method was further developed) has been built by identification of the main factors, i.e., the volume of generated waste from economic activity per unit of GDP at constant prices, emissions of pollutants, and capital investments for the protection of the environment. Factor coefficients indicate how many units will change the resultant trait Y, measured in thousand tonnes, if one of them changes by 1 (each in units of measure). It means that if the volume of waste generated from economic activity per unit of GDP at constant 2011 purchasing power parity (PPP) prices decreases by 1 kg/$1000, waste management of I–IV classes will be reduced by 952,737 thousand tonnes. The approbated model can be used to analyze the situation with recycling in the EU countries, considering the amount of capital investment in environmental protection.

Can Sub-Saharan Africa Be a Manufacturing Destination? Labor Costs, Price Levels, and the Role of Industrial Policy

Our central question is whether, and how, African countries can break into global manufacturing in a substantial way. For many poor countries, labor-intensive sectors based on low-cost production platforms have been the first step on the industrial ladder. Using a newly constructed panel of firm-level data from the World Bank’s Enterprise Surveys, we look at labor costs in a range of low- and middle-income countries in Africa and elsewhere. Using fixed and random effects models, we find that relative to comparator countries at comparable income levels, industrial labor is more costly for firms that are located in Sub-Saharan Africa. This suggests that, if they are to industrialize, most countries will need to seek other paths, whether based on natural resources or on regional integration, or measures to improve their business climates and upgrade their skills to the point that competitiveness improves enough to sustain industry without resorting to low wages. Such a “balanced strategy”—perhaps along the lines of the “matrix” approach advocated for Europe—may be more politically appealing for some countries but in the interim it risks failing to create large numbers of industrial jobs and perhaps foregoing learning opportunities. However, we also find that Africa is not homogeneous: there are a few countries that, on a labor cost basis, and also on the basis of observed purchasing power parity price levels, may be potential candidates for low-wage manufacturing. Ethiopia stands out and appears to be making efforts to position itself as a low-cost manufacturing platform, although it is too early to pronounce on its success. We analyze its policies from a cost-competitiveness perspective, including those related to agriculture, to investor incentives, and to holding down the costs of essential inputs and improving their supply.

The impact of production shocks on maize markets in Ethiopia: implications for regional trade and food security

In this article, we demonstrated the dynamic impact of a bumper harvest and drought shocks on the maize market and on the trade regime in Ethiopia. Regional market integration of Ethiopia’s white maize market with the South Sudan and Kenyan maize markets was also examined using cointegration analysis. Despite the renewed conflict in South Sudan, Addis Ababa maize market is cointegrated with Juba’s maize market. The simulation analysis indicated that a 20% increase in maize yield could reduce the maize price by 81%. This implies a decrease in the maize price level of 70% (110 USD/t) below the export parity price. This makes maize exports profitable and shifts the trade regime from autarky to an export parity regime. On the other hand, the effect of a drought could increase maize prices by 61% in the short run (within the year). At the current market price, the domestic maize price is wandering between the border prices and it is unprofitable to export maize. Therefore, lifting the export ban, even during normal harvest seasons, would not do any harm to the domestic maize price.

Heterogeneous Impact of Supplemental Nutrition Assistance Program Benefit Changes on Food Security by Local Prices

The Supplemental Nutrition Assistance Program benefit amount is fixed across all 48 states (except Hawaii and Alaska), although food prices vary widely. Hence, the real value of Supplemental Nutrition Assistance Program benefits can directly affect the purchasing power of Supplemental Nutrition Assistance Program participants and subsequently their food insecurity. Using the 2 most recent changes to the Supplemental Nutrition Assistance Program benefit formula in 2009 and 2013, this study examines whether the changes in benefit level affected food security of participants differentially depending on local food prices. Data from the Current Population Survey-Food Security Supplement 2008-2009 and 2012-2013, merged with the Regional Price Parities from the Bureau of Economic Analysis, were used. Linear regression with a differences-in-differences strategy estimated the effects of Supplemental Nutrition Assistance Program benefit changes on the food security of Supplemental Nutrition Assistance Program households, separately by those in high- and low-cost areas. The analyses were completed in 2019. After the benefit increase, the prevalence of low food security among Supplemental Nutrition Assistance Program households living in high-cost areas declined by 11.2 percentage points (95% CI=1.6, 20.8). Following the benefit decrease, the prevalence of very low food security among Supplemental Nutrition Assistance Program households increased by 8.7 percentage points (95% CI=3.6, 13.8) in high-cost areas. In contrast, there was no statistically significant difference between Supplemental Nutrition Assistance Program and non-Supplemental Nutrition Assistance Program households in low-cost areas in response to the benefit changes. Given the heterogeneous effects of the Supplemental Nutrition Assistance Program benefit changes on food security by local food prices, this study provides additional evidence for the ongoing policy debate regarding whether the Supplemental Nutrition Assistance Program benefit amounts should be adjusted to the cost of living.

Eficiencia y competencia en el mercado de combustibles de la República Dominicana

Este documento analiza algunas de las normativas que rigen el mer­cado de combustibles dominicano con el objetivo de proponer mejo­ras que incrementen la eficiencia y la competencia. Partiendo de un análisis descriptivo y econométrico para estimar la importancia del mercado de los combustibles en la economía dominicana, el trabajo se concentra en analizar aspectos de la legislación relacionados con la fijación de precios, de márgenes de intermediación y de costos de entrada dentro del sector, para luego realizar una serie de recomenda­ciones orientadas a reducir los costos de operación e incrementar el dinamismo del mercado. El trabajo muestra que los costos de entrada, al igual que el establecimiento de precios a través de la fórmula de Precio de Paridad de Importación (PPI), son mecanismos ineficientes que dislocan el uso de recursos y elevan los costos del uso de com­bustibles energéticos para las empresas y para el consumidor final. El mercado de combustibles dominicano cuenta con un número impor­tante de actores que permiten una mayor competencia dentro de este mercado.

Measuring the spatial price differences in China with regional price parity methods

AbstractThe measurement of prices has been an important field in economics, and a spatial price index is very useful in comparing the standards of living and well‐being across regions in a country. This paper intends to measure the regional price parities (RPPs) across different provincial areas in China with an urban sample of 140 goods and services in 2015 according to the framework of the International Comparison Program (ICP) methodology. The results show that the RPPs that were estimated with commonly used approaches, such as the Gini–Éltetö–Köves–Szulc (GEKS), Geary–Khamis (GK) and weighted country product dummy (WCPD), are only slightly different. The RPPs of three regions including Guangdong, Shanghai and Zhejiang are greater than 1 (with Beijing = 1), while the other 27 regions are all lower than 1, which represents price levels that are less than Beijing. In the extrapolation of the RPPs from 2000 to 2014, a significant descending trend is found for the standard deviation series of the RPPs over time that shows that the price differences across regions decreased during the extrapolating period. This finding provides evidence of a phenomenon of spatial price converging in China. Finally, a study on the deflation of provincial aggregates with the RPPs reveals that the spatial price adjustment will change the ranks or relative importance of different regions in the country. Especially, the measurement of income inequality proves that the Gini coefficients of provincial income deflated by the RPPGEKS are all lower than the Gini coefficients of unadjusted incomes.

Price Parities for Vegetables in Serbia - Analysis and Forecasting

Summary The paper analyzes price parities of important vegetable crops in Serbia in relation to wheat, which has always been a point of reference in price formation of other agricultural products. The analysis was carried out by means of descriptive statistics for the period 1994-2017 for the following vegetable crops: potato, bean, tomato, pepper, onion and cabbage. The method used for forecasting of the price parities for the period 2018-2022 is time series analysis, i.e. ARIMA models. The research results showed that the price parities of bean, tomato and pepper will increase: from 9.1 to 12.3 for bean, from 1.9 to 3.5 for tomato and from 2.3 to 3 for pepper. The price parities for potato (1.4) and cabbage (1.4) will remain practically unchanged, while the price parity of onion will decrease to 1.5.

Vegetable production in Saudi Arabia: Protection coefficients and relative efficiency

This research investigated the protection coefficients and relative efficiency of winter vegetables by using the domestic and tradable inputs of some selected winter vegetables in Saudi Arabia to explore the economic incentives of local vegetables. The data was analyzed using gross margin and Policy Analysis Matrix (PAM) approach. The outcomes of this research revealed that the eggplant constitutes a highest gross margin as compared to other local vegetables. Moreover, the private price of potato output is more than their parity price. The producers of tomato crops are nearly protected. However, during the study period, the producers of tomatoes, zucchini, and ladyfingers were subsidized and largely competitive on their exports. Furthermore, the study indicated that the government supported eggplant and cucumber vegetables. The research suggests for establishment of international trade collaboration to reduce fees and removal of policy distortions to rise the incentives for vegetable producers.

APPLYING INNOVATIONS IN THE AIC AS A METHOD TO INCREASE FOOD SECURITY OF RUSSIA

There has been investigated the innovative component of the agro-industrial complex as a key factor to ensure food security of the Russian Federation. Basing on statistical data, there have been analyzed the current situation and results of production in the Russian agro-industrial complex. There has been revealed the influence of the innovative component of the agro-industrial complex ensuring the country’s food security. It is proved that agriculture can fulfill the tasks assigned to it, only if it is surrounded by an economic and legal environment, which takes into account the necessary completeness, the inherent differences. It is substantiated that the integrated system of agricultural assessment should be at the center of attention of the state administration and be implemented not sporadically, but permanently, in accordance with the demand for agricultural products. The grain farming can become a promising export resource under certain conditions such as reorganizing radically the procurement system, improving warehouse and transport infrastructure, saving seed material and reaching price parities for agricultural products and the means of their production. The necessity of applying state co-financing as the main form of state support for innovative development is substantiated. In the long term, the agricultural industry will be profitable and it will be able to function mainly without state subsidies.

U.S. Income Comparisons with Regional Price Parity Adjustments

Abstract Using official regional price parities (RPPs) recently released by the U.S. Bureau of Economic Analysis, we investigate how RPP adjustments affect the entire distribution of U.S. family incomes, poverty, inequality, tax progressivity, and metro-size agglomeration premiums. We find that higher-income families tend to live in higher-price areas, so regional mean incomes converge as real incomes fall in richer, higher-cost regions and rise in poorer, lower-cost regions. Further, the differences in poverty rates for the metro and non-metro areas vanish and we find re-rankings in poverty rates among the 9 Census Divisions. RPP adjustments also influence income inequality and effective U.S. tax progressivity. They increase effective federal tax progressivity by more than 25 %, equivalent to a $2,500 cash transfer. When we control for local prices and the characteristics of the family head, income (agglomeration) premiums for major metropolitan areas largely, but not completely, disappear.

The policy analysis matrix of pulse crops production in Bangladesh

This study examined the relative efficiency of producing of selected pulse crops in Bangladesh and their comparative advantage in international trade. To know the comparative advantage in production of selected pulse crops. The study have calculated net financial and economic profitability, nominal protection coefficient of output (NPCO), nominal protection coefficient of input (NPCI), effective protection co-efficient (EPC), private cost ratio (PCR), policy analysis matrix (PAM) and domestic resource cost (DRC). Data used in this study were collected through Household surveys from 300 sample farms located in 12 villages under 6 districts in Bangladesh for the period 2015 to 2016. The selected pulse crops i.e lentil, chickpea and mungbean cultivation at farm level is very much remunerative to its growers. The domestic-border price ratio of selected pulse crops indicates that domestic pulse production was taxed and consumers were subsidized. The border price of selected pulse crops at producer level was mostly higher than the domestic producer price indicating that there is a wide scope to cultivate pulse crops for import substitution in Bangladesh. Policy Analysis Matrix for selected pulse crops under import parity prices showed that revenue transfer (Tk -14,755/mt) was negative indicated that government policies affect negatively to the pulse producer. The input transfer (Tk -1108/mt) was also negative indicating that the government has implemented input subsidy policy to the crop sector to offset higher cost of production. The domestic factor transfer was positive (Tk 15,171/mt) indicating that opportunity costs of non-tradable inputs were lower than their market prices. Finally the net profit/net policy transfer (Tk -28,503/mt) was negative which means that, the producers earn less profit and cannot minimize loss under existing condition and vice-versa. This means that under free trade, producers could make more profit in contrast to the existing policy environment. The NPCO values less than one imply that policies do not provide nominal protection for the pulse producers. The findings based on the indicators of NPCO, NPCI, EPC and PCR conclude that the existing government policy environment tends to protect the interest of the pulse producers in agricultural sector at production level. DRC results indicated that Bangladesh had comparative advantage of producing pulse crops and production of pulse crops would be highly efficient for import substitution.Bangladesh J. Agril. Res. 43(1): 109-123, March 2018

The rich and the poor: A note on countries’ classification

With respect to the official thresholds of development in terms of GNI per capita, all developing countries have made remarkable progress; between 1987 and 2015 the number of Low Income Countries has decreased from 42 to 31, while that of High Income Countries has increased from 25 to 79. This rosy picture is largely due to the specific way in which the thresholds have been updated. This paper revises the thresholds according to the increase in the world income per capita during those 28 years. The revised thresholds give a less optimistic description of the economic improvements that occurred during these 28 years, but they provide a better classification of the changes in relative income per capita levels. According to the World Bank’s classification, middle-income countries host the majority of the poor. With the methodology proposed in this paper this is still true, but only because India marginally belongs to the LMICs group. The paper discusses the implication of the proposed thresholds for the extreme poverty line, which in 2015 has been updated to 1.90 US$ a day at 2011 Purchasing Power Parity prices.