Subsector Level Research Articles

Cointegration, common features, and persistence in U.S. farm output

This paper determines the persistence of shocks to U.S. farm output at the sectoral and sub-sectoral level using a disaggregated vector autoregression framework. The persistence is measured under models that impose short-run common feature and long-run cointegration restrictions. The sub-sectoral outputs are found to have a relatively high degree of comovement in the short-run and a relatively low degree of comovement in the long-run. The common feature and cointegration restrictions are found to improve the precision of persistence and cross-persistence estimates. Subsectoral persistence shows considerable variation; persistence in Poultry & Eggs sub-sector is nearly three times the persistence in the Fruits & Nuts sub-sector. Two sub-sectors that share long-run common trends, Food Grains and Feed, Hay & Forage, also have significant cross-persistence, implying technological spillovers.

Sources of Growth in East African Agriculture

A dynamic agricultural sector is critical for alleviating sub-Saharan Africa's current economic crisis, and for laying the foundations of sustained future growth. In recent years, however, agriculture has performed poorly in many African countries. Efforts to assist its recovery, often through structural adjustment lending, have suffered from inadequate information about country- and region-specific factors, and from an emphasis on macroeconomic policies without complementary interventions at the sector level. The article describes the patterns of agricultural growth in Kenya, Malawi and Tanzania, and examines price and nonprice aspects of three sets of factors: initial endowments and subsequent exogenous development, general economic influences, and sectoral issues and policies. It suggests that government action at the sectoral and subsectoral levels in such critical areas as land policy, smallholders' access to inputs, and agricultural research needs to be combined with macroeconomic reforms to achieve sustained and broadbased agricultural growth.

Hierarchically organized economics: input-output analysis

In this paper a model for the study of hierarchically organized economics is proposed. The input-output analysis method is used to describe the interactions between the economic world level, the economic national level and the level of economic sectors and also the interactions between the national level, the level of economic sectors and the level of subsectors or branches of industry. Perturbation methods are used to describe the weak couplings between the different levels of organization of the economic system. A method is presented to derive a master equation giving the time dependence of total production from fundamental equations governing the time evolution of the production of elementary sectors. This method is then applied to hierarchically organized economics.

A Ricardian model of market sharing

The latest generation of multi-sectoral trade models has abandoned the conventional strategy that regards the similarly named exports of different countries as homogeneous products. Armington's assumption, that the products of different countries compete as imperfect substitutes, has become the theoretical rationale for an alternative, heterogeneous modeling procedure. This paper describes some problems with the assumption and develops a more rigorous framework for the heterogeneous strategy. The processes that lead to heterogeneity in trade are modeled explicitly: comparative advantage theory is applied at a sub-sectoral level to explain the detailed structure of international specialization. Implications of the new framework for empirical estimation are also explored.

Farmers' Expectations, Risk Aversion, and Market Equilibrium under Risk

The way in which farmers form their price and yield expectations and the consequences of these expectations on ensuing market equilibrium when production is risky are examined. If rational expectations are assumed, competitive market equilibria can be simulated in sectorwide mathematical programming models. This simulation is illustrated using a linear programming model of agricultural production at a subsector level in Mexico. Competitive markets are inefficient if farmers ignore correlations between stochastic prices and yields; competitive markets are efficient if correlations between stochastic prices and yields are taken into account. The simplest way in which this can be achieved is for producers to project last year's per acre revenue for each enterprise. This approach can be incorporated into agricultural sector models by using linear programming methods. As results from an application at a subsector level in Mexico show, the adoption of linear programming methods may cause important differences in the solutions as compared with conventional model formulations. Three tables provide such data on average district cropping patterns, price solutions for the price expectations model, and price solutions for the revenue expectations model. 6 references.