Projects Funded for 2013-2014

The Effects the Supplemental Nutrition Program on Food Purchase Decision

Abstract

Specific Objectives of the Project Improving the nutritional content of school meals is a topic of intense policy interest. The primary motivation underlying these nutritional improvements is to increase student health and reduce childhood obesity rates. A question of comparable import, however, is whether healthier meals affect student achievement. To answer the question of whether the quality of school meals affects student achievement we exploit longitudinal variation in California school district contracts with meal vendors to estimate differences-in-differences type specifications. Using five years of detailed test score data for California public schools, our goal is to test whether contracting with “healthier” meal vendors significantly increases standardized test scores.

Project Report/Summary of Results We find that contracting with a healthy meal vendor increases test scores by 0.03 standard deviations. This result is statistically significant and robust to the inclusion or exclusion of our time-varying covariates. In contrast there is no significant effect of contracting with a standard vendor. We also estimate effects separately for economically disadvantaged and non-disadvantaged students. We find that contracting with a healthy vendor has almost twice as large an effect on economically disadvantaged students (0.05 standard deviations) as it does on non-disadvantaged students. This may occur because economically disadvantaged students are more likely to eat school-provided meals or because economically disadvantaged students have poorer counterfactual nutrition intake (or both).

Detecting and Attributing the Impact of Historical Climate Change on California Agriculture

Abstract

Specific Objectives of the Project

Use all available data California's major and specialty crops to estimate the impact of historical impact of climate change on California's Agricultural sector.

Summary of Results

We have put together a large dataset on county level crop yields for California by drawing on studies conducted under the auspices of the CEC's now defunct PIER project. We have extended these databases to current day using county level crop reports. We have matched these reported yields to the crop calendar for each crop and measures of weather from the data product provide d by Roberts and Schlenker. In order to come up with historical weather without climate change, we have obtained the IPCC's AR5 historical and future climate series with and without anthropogenic forcing. We have estimated yield response functions and are finishing the simulations this summer. This study was motivated by questions I received during an outreach activity with farming lobbyists organized by the Secretary of Agriculture in Modesto earlier this year.

Distributional Effects of Increasing Block Rate Water Budgets

Abstract

Specific Objectives of the Project

Develop a theoretically consistent approach for estimating the welfare effects of switching to block-rate water pricing; apply the model to a data set from a southern California water district; investigate distributional effects particularly for disadvantaged groups.

Summary of Results

During the funding cycle, the PIs worked closely with a graduate student to develop the theoretical framework and convert it to computer code for empirical estimation. We have made substantial progress and expect to have preliminary results ready for disse mination at two conferences this summer. The theoretical framework is complete and has been written-up as a draft manuscript (see below). The framework essentially modifies the DCC statistical structure so that it is applicable to a direct utility function rather than a demand function. The resulting likelihood equation is similar to but more complicated than the standard DCC likelihood equation and requires simulation techniques for evaluation. We are currently writing the computer code to implement these techniques and will then apply the model to an existing dataset to estimate the welfare effects of changes in block rate water prices.

Estimating Food Attributable Fractions of Foodborne Illness from Time Series Data

Abstract

Specific Objectives of the Project

Can we explain food borne illness by consumption patterns?

Project Report/Summary of Results

We matched the consumption patterns of food by market area using Nielsen Homescan Data with non-outbreak incidence data for two pathogens using FoodNet data. We found that most of the explanatory power for food borne disease incidence was the place and time of the cases. While there was some association between food consumption and disease incidence, the vast majority of the explanatory power must lie in things other than consumption patterns, for instance, in contamination.

Water Conservation through Informed Residential Electricity Consumption

Abstract

Specific Objectives of the Project The issue that this project addresses is the heavy consumption of water in the Californian electricity system. The specific objectives related to that topic are: 1. Research: develop an algorithm to calculate, in real time, the current marginal rate of indirect water use from California electricity consumption per KWh, weighted by the social value of that water (e.g. higher during droughts and in stressed watersheds). 2. Policy: provide this information in real time to interested consumers in California, thus directly creating a tool to permit environmental-based choice in electricity timing. 3. Research: through randomized variation in the presentation of information, test the efficacy of this technique in reducing water consumption from electricity in California.

Project Report/Summary of Results The production of electricity uses a considerable amount of water in California, with consequences for the availability of water for agricultural use in the state. Further, the marginal indirect water consumption of electricity use varies over time; thus, consumers could in theory reduce their indirect water consumption by shifting their consumption of electricity to less water-intensive times. This project aims to construct and measure the efficacy of a tool to enable that kind of inter-temporal shifting of electricity consumption.

This research has proceeded in three separate steps: (1) developing an algorithm to calculate the marginal rate of indirect water use from California electricity consumption per kilowatt-hour in real time; (2) providing the results of that algorithm to consumers in California, directly enabling a new form of water conservation; and (3) measuring the impact of this information on consumer electricity timing and therefore indirect water consumption. An unanticipated additional goal met by this project was the development of a variety of software tools to reduce the effort “cost” of such shifting.

Effect of Cap and Trade Costs on Food Processors in California

Abstract

Specific Objectives As part of the Cap and Trade Program supporting Assembly Bill 32 (AB32), the California Air Resources Board addresses the potential greenhouse gas (GHG) emission leakage created by changes in competitive advantage between California and out-of-state entities. To the extent that industries with high emissions intensity per dollar of value-added lose market share to out-of-state rivals in response to a rise in energy input prices, the market transfer of production to unregulated regions undermines the effectiveness of AB32 in reducing global GHGs. The primary objective of the proposed research is to assess the likely extent of market transfer in California's food processing industries.

Project Report/Summary of Results This project calculates the extent of market transfer and emissions leakage resulting from greenhouse gas (GHG) regulations on California tomato, sugar, wet corn and cheese processing industries. GHG regulations that raise energy input prices at food processing plants in California have the effect of selectively raising the marginal cost of food processing for California plants, resulting in a cost advantage for unregulated plants in other production regions. Our analysis indicates that selective GHG regulation in Californias AB32 policy will result in significant market transfer from California food processing industries to food processors that produce in unregulated regions.

Market transfer effects are a serious hindrance to well-functioning greenhouse gas (GHG) regulations for at least two reasons. First, selective regulations on California plants reduce regional manufacturing activity in the state, decreasing both tax revenue and employment. Second, the transfer of production from California to other region results in leakage of GHG emissions across state (and national) without improving global climate outcomes. Indeed, global emissions can rise as a result of AB 32 regulations in the event that the displaced California production is produced from natural gas inputs while manufacturers receiving the transferred output rely on coal-fired plants for energy.

The predicted market transfer effect in each food processing industry depends on supply and demand conditions facing California producers. Some combination of three things must occur in response to an increase in the marginal cost of production: (i) the cost increase can be passed forward to consumers in the form of higher prices for manufactured food; (ii) the cost increase can be passed backward to farmers in the form of lower farm prices; or (iii) the cost increase can result in narrower margins for food processors. In this report, we subsume the latter two effects into our calculation of backward shifting, as our data is not sufficiently rich to distinguish how cost increases predicted to be absorbed in each industry are likely to be shared between California farmers and food processors. Backward shifting of costs as a result of AB 32 regulations results in lower value for farm products procured by California food processors, which would be shared in some fashion between food processors and agricultural producers through lower prices for farm products, and our results are expressed in terms of this lower combined value in the California supply chain.

Market transfer from California food processors to food processors in other, unregulated production regions is mediated through forward shifting effects of the regulation into consumer prices. Cost increases passed forward into consumer prices provide food processors in other regions with the economic incentive to increase production. As a result, the forward shifting effect of an increase in marginal cost among California producers leads to both decreased demand for the processed food product as well as a loss in market share for California plants. We measure the market transfer effect in each industry as the share of the decrease in processed food output by California producers that is acquired by out-of-state producers.

Immigration Reform and Agricultural Competitiveness

Abstract

Specific Objectives of the Project Over half of California’s farm workers are unauthorized, prompting proposals for a 3-pronged immigration reform, viz, enforcement measures to discourage the entry and employment of unauthorized foreigners, legalization for most of the 11 million unauthorized foreigners in the US, and new guest worker programs. Agriculture is treated differently in immigration reform proposals. It is subject to the same enforcement measures, but unauthorized farm workers have a unique path to legal status and the farm guest worker program is different from other programs that admit foreigners to fill low-skill jobs. This project uses research, education, and dissemination to assess the implications of current immigration patterns for the state’s agricultural competitiveness and the potential impacts of reform proposals.

Project Report/Summary of Results The Giannini Foundation supported a three-pronged research, conference, and newsletter effort. The three major outcomes included: • Analysis of how current immigration patterns affect production decisions (there have been few labor constraints to expanding production of strawberries and other very labor-intensive commodities) and the potential impacts of immigration reforms, such as a $1 to $2 an hour housing allowance for legal guest workers that would be offset by a $1 to $2 an hour reduction in the special minimum wage for guest workers • Conferences that brought researchers together with policy makers and advocates to discuss immigration’s impacts in particular commodities and communities and to enable researchers to learn about policy options being discussed. • Rural Migration News summarized and analyzed significant developments each quarter in farm labor, immigration, and agricultural communities (http://migration.ucdavis.edu/rmn). Rural Migration News, which has earned a reputation for accurate and reliable analysis, is read by 1,500 researchers and extension specialists, students, and policy makers and the media, and is often cited in academic journals. In addition to dissemination via Rural Migration News, project-related papers were published in the AJAE, Choices, and ARE Update.

Quantifying Agricultural Adaptation to Climate Change

The Potential for Forecasting to Improve Energy Efficiency Policies in California

Abstract

Specific Objectives of the Project
  1. Create an econometric forecasting model that uses spatially and temporally disaggregated electricity consumption data along with weather and economic variables to predict a baseline level of regional electricity consumption in California.
  2. Determine the feasibility of using the counterfactual baseline consumption as a tool for measuring the performance of energy efficiency programs.
Summary of Results

We have obtained detailed electricity consumption data from the Sacramento Municipal Utility District (SMUD) and merged these data with hourly weather data and block-level census data. These data include the following:

  1. Hourly consumption by almost all households in the SMUD region (approximately 500,000 premises) for all of 2012 and 2013.
  2. Monthly electricity bills for almost all households in the SMUD region (approximately 500,000 premises) for 2005-2013.
  3. County assessor information on house cha racteristics.
  4. Energy efficiency program participation (89,000 records)

After several delays, we obtained these data in March 2014. To preserve individual privacy, we do not know the address of any premises in our sample.

The strongest predictor of household electricity use is temperature, which follows from the fact that air conditioning is a major source of household electricity demand. However, there is a lot of variation in the response of electricity consumption to temperature depending on the day of the week, the size and age of the home, and other characteristics. We have formulated an econometric approach to incorporate this heterogeneity and are in the early stages of testing our model.

So far, in testing our model, we have focused on the e nergy efficiency programs related to air conditioning (AC). AC programs are the largest operated by SMUD in terms of number of participants, and they potentially have the largest effects on electricity use. AC programs constitute just over a quarter of our energy efficiency program observations (about 27,200 records).

In preliminary analysis, we observe large reductions in peak electricity use for homes that replace an old air conditioning unit with a new one under an energy efficiency program. We obtain these results by conditioning on temperature, e.g., we estimate how much electricity is used when the temperature is 100° F before and after the energy efficiency intervention. This finding suggests that a forecasting model that conditions on temperature ha s the potential to provide an effective estimate of counterfactual baseline consumption.

There is significant variation across homes in the response to temperature, the response to the energy efficiency program, and propensity to participate in the program. Our next steps are to model this heterogeneity so as to obtain precise quantitative estimates of the baseline, and to expand our analysis to all of SMUD's energy efficiency programs.

Estimating the Joint Distribution of Crop Yield and Weather

Abstract

Specific Objectives of the Project

A crucial question for farmers and agricultural economists is how weather affects yield and risk. Unfortunately, relatively little is known about the joint distribution of yield and weather. We propose estimating the joint distribution of corn yield, temperature, and precipitation (during the flowering season).

Summary of Results

We have collected the data and have worked on the econometric techniques to estimate the trivariate distribution of corn yield, temperature, and precipitation. These techniques have been used to demonstrate feasibility with artificial data. However, we have not yet estimated using actual data.

Determinants of Deforestation in Mexico

Abstract

Specific Objectives of the Project

Mexico has been one of the fastest deforesting countries in the world, usually as a consequence of logging and fires to transform natural forests into pasture and farm land. Rapid and uncontrolled deforestation is threatening rainfall patterns in the MesoAmerican and US Southern areas, including California. Mexico is a world Valivov center, so this deforestation has heavy costs on biodiversity, for instance on the Monarch population that reproduces in Mexican forests before flying to California, the United States, and Canada. Forest fires are also a major source of CO2 release that contributes to global climate change. Haze from forest fires is known to affect agriculture in the United States and can be a threat to public health. More effective forestry and land tenure policies are urgently needed in Mexico. These policy issues should be c onsidered as bi-national initiatives as they affect climate, biodiversity, carbon release, and health on the two sides of the border.

Summary of Results

Economic theory predicts that well-defined private property rights over land incentivize efficient transactions between owners, efficient levels of investment as well as optimal allocation across different uses. Thus a strengthening of property rights and the subsequent reduction in tenure insecurity should affect allocations of land across forest, agriculture and forest, depending on the relative returns to each use. As a part of Mexico's second agrarian reform in 1993, the Programa de Certificacion de Derechos Ejidales y Titulacion de Solares (Procede) was implemented to certify all land in Mexico's ejido communities. Using LANDSAT images of ejido and non-ejido land to characterize land use and suitability for different uses in Mexico over this period, we find that the average ejido does in fact alter its allocation of land across forest, agriculture and pasture in response to certification. While the average results indicate that Procede had a positive effect on forest (31 ha.), an offsetting negative effect on pasture (29 ha.), and no effect on agriculture, we explore further heterogeneity based on land suitability. The pattern suggests that strengthening property rights induced a shift in land allocation towards one that better fits the underlying characteristics of the land. In total, the area deforested over 1990-2010 would have been approximately 14 percent higher, there would have been 26 thousand fewer hectares of cultivated land, and 712 thousand more hectares of pasture had Procede not been implemented and ejido land left uncertified.

Non-Price Competition in the California WIC Program

Abstract

Specific Objectives of the Project

The goal of this project is to investigate the methods of non-price competition utilized by food retailers and to assess the impact of spatial competition in food retailing. With unique data from the California Women, Infant and Children (WIC) Program we are able to study product offerings (e.g., brands, package sizes, etc.) of retailers. In addition, because WIC participants can only redeem Program vouchers at authorized vendors, the WIC retailer data allows us to study any and all competitors of a given authorized vendor. This will give us unique insight into spatial competition issues that heretofore have not been explored.

Summary of Results

We use reduced-form empirical models of observed market outcomes and characteristics of food retailers serving the WIC Program to study brand competition. The unique institutional features of California WIC create a competitive environment where: (a) participants' demand for WIC food products is inherently perfectly price inelastic, (b) a special class of food retailers, called A50 vendors, cater nearly exclusively to WIC participants and (c) do not compete in price. Modeling the competitive behavior of A50 vendors thus allows for natural abstraction from strategic price setting, one of the main distinguishing features of this work from other empirical studies of non-price competition. A50 vendors tend to have multiple potential competitors within a short distance of their location although there is significant variation in the measured intensity of spatial compe tition. We find that certain brand characteristics diminish the impact of having multiple competitors in close proximity. Having more of certain brand types reduces vendor attrition, the rate at which participants fail to be repeat customers at a given vendor. Contrary to the belief that food assistance-eligible consumers face limited attrition when the proximity of other A50 competitors grows. In such an environment, A50 vendors with more of certain brand types (but not others) reduce attrition, effectively minimizing the intensity of spatial competition. Therefore, in order to alleviate the effect of facing competitors, food retailers have a strong incentive to engage in brand competition.

Second, we find that vendors who carry more numerous and costly brands of certain product categories have higher shares of WIC food benefits redemptions. A50 vendors tend to carry, for example, the same leading brands of breakfast cereal, where having more brands and carrying brands with higher wholesale costs pays off in terms of market share. On the other hand, vendors carry few leading brands of fruit juice where neither quantity nor quality correlate positively to market shar e. Thus food retailers may optimally focus brand competition in specific product categories rather than competing in all.

Regulating Pollution through Cap-and-Trade: Effect of Regulatory Uncertainty on Fossil-Fuel Energy Producers' Abatement Strategies

Abstract

Specific Objectives of the Project

This project will examine the performance of the first large-scale cap-and-trade pollution control program in the United States, the Acid Rain Program (ARP). We will focus on the implications of ARP for the implementation of the cap-and-trade program in California, AB 32. In particular, we will test the effects of operators' uncertainty concerning future regulation on their adoption of abatement technology.

Summary of Results

As the first large-scale, long-term application of cap and trade to control emissions, the Acid Rain Program (ARP) has attained remarkable success in terms of sulfur dioxide (SO2) emission reduction and abatement cost saving. In this study, we first investigate electric generating units' compliance strategies under the ARP using a discrete-continuous model. In the first step, a unit is assumed to make a discrete choice between two major SO2 abatement strategies, installing a scrubber or switching to/blending with low-sulfur coal (jointly noted as non-scrubbing). Conditional on the chosen abatemen t strategy, the continuous emission rates of each unit are determined in the second step. The results show that units with higher potential scrubbing capital costs and lower low-sulfur coal prices are more likely to choose coal switching/blending. Also, older units and units covered in Phase II of the ARP tend to choose coal switching/blending. Conditional on non-scrubbing, the emission rates are increasing in price premium of low-sulfur coal, electricity output, and original sulfur content, and decreasing in unit capacity. The estimate compliance costs for Phase I units are around 85.26 million dollars in 1995, and around 673.21 million dollars for all sample units in 2000.

In order to eliminate the significant contribution of SO2 emissions to the downwind non-attainments, EPA issued the Clean Air Interstate Rule (CAIR) in 2005, applying a more stringent emission cap on some upwind states. The CAIR was vacated in 2008. In 2011, EPA finalized the Cross-State Air Pollution Rule (CSAPR) to replace CAIR, but the implementation of the CSAPR is still unclear. The regulatory uncertainty since 2005 resulted in dramatic fluctuation of SO2 allowance prices. Anticipating the more stringent CAIR, the SO2 allowance prices increased remarkably to the peak of around $1,200 /ton in 2005. After CAIR was vacated, the allowance prices decreased sharply to around $70/ton in 2009. Using the estimation results of the discrete-continuous model, we further simulate units' compliance strategies and calculate their compliance costs associated with these price fluctuations. In 2005, if allowance price peaks at $1,200/ton, 725 of 872 sample units would install scrubbers, leading to 10.4 million tons of SO2 emission abatements and 4273 million dollars of abatement costs. In 2009, if allowance price drops to $70/ton, only 9 units would choose scrubbing, resulting in 1.07 million tons of abatements and 37.6 million dollars of abatement costs.

Agri-environmental Incentives and the Waste Management Practices of Dairy Farms in California

Abstract

Specific Objectives of the Project

The project summarizes the existing federal and local agri-environmental incentives for waste-management practices of livestock operations and examines specially the choices faced by dairy farmers in California. This research will contribute to our understanding of how specific incentive mechanisms interact with each other and under what conditions multiple levers are necessary. This research will also help us to understand farmers' decision-making under regulatory uncertainty and complexity. Findings of this project will shed light on the future design of agri-environmental payment programs.

Summary of Results

This grant supported research on how a local air quality regulation (Rule 4570) has affected the economic performance of dairy farms in the San Joaquin Valley. Estimated adoption rates of different pollution-mitigation practices reveal that dairy farms have adopted labor-intensive production practices to comply with the air quality regulation. Using farm-level cost data on a panel of dairy farms, The project estimated the effects of the regulation on the costs of milk production. Econometric results indicate that the air quality regulation has not significantly affected the total costs of milk production. Estimates from different specifications indicate that the regulation may have reduced feed costs during some periods, perhaps because some pollution-mitigation practices can reduce feed fermentation.

The End of Farm Labor Abundance: What it Means for California Agriculture

Abstract

Specific Objectives of the Project

This project used panel econometric methods to econometrically estimate and identify the determinants of the declining trend in the farm labor supply using household data from rural Mexico and began estimating the impacts of a changing farm labor supply on California agriculture.

Summary of Results

Data from the Mexico National Rural Household Survey (Spanish acronym: ENHRUM) permit us to track a nationally representative sample of rural Mexicans into and out of farm jobs over time—a total of more than 125,000 person-years of data. Our econometric analysis of these data shows a significant decrease in people's probability of working in agricultural jobs over time. This includes agricultural work in the village, in other parts of Mexico, or in the US. The downward trend in farm labor supply is pervasive across Mexico's five census regions. The supply of agricultural labor from rural Mexico is falling at a rate of 0.13%, or 11,200 workers per year. Our preliminary findings show that a number of different factors explain rural Mexica ns' gradual shift out of farm work. We are using the ENHRUM data to analyze these factors using panel econometrics. The two largest negative factors appear to be growth in Mexico's non-farm economy and the expansion of rural schools in Mexico. Increased US border enforcement increased the farm labor supply slightly, by keeping some people from migrating to the US. Border enforcement, drug-related violence, and economic conditions in the US influence where Mexicans work more than whether or not they do farm work. All of this is against a backdrop of a dramatic fall in Mexico's fertility rate, which is 2.05 children per woman, almost the same as the US and below replacement.

The transition of Mexican workers away from agriculture will have profound impacts for the U.S. farm sector, which historically has depended on an elastic supply of Mexican farm labor and will now have to compete with Mexican farms for a dwindling supply of labor. In the short run, the ramifications of a lower agricultural labor supply are partly mitigated by a decreased labor demand because of the California drought. We have begun collaborating with Josue Medellin and Richard Howitt to integrate labor into their California crop model, which was originally designed to evaluate the impacts of drought on specific crops. We are deriving employment multipliers of the drought, and will follow this with simulations of the impacts of farm labor-supply shocks on production. This will make it possible to understand interactions among climate change, farm labor supply, and crop production in California. On the Mexico side, we have compiled daily rainfall and temperature data from all weather stations within a 50 km radius of each village in our national rural household data set for the entire period covered by our labor data (1980-2010). This, we hope, will enable us to project impacts of climate change on labor allocations—including farm labor migration—by rural Mexican households.

Institutional Choice for Agricultural Producers: Evidence from California.

Abstract

Specific Objectives of the Project 1. Construct a comprehensive theoretical model of institution choice for agricultural producers, both unconstrained and constrained by institution availability. 2. Design and conduct a survey for two agricultural markets (stone fruits and rice) in California to collect information on cooperative participation, marketing order voting, contracts, and agricultural industry association participation. 3. Estimate an empirical model of institutional choice using these survey data and supplemental publicly available data. 4. Disseminate the results of our analysis to producer groups and government to improve practices and policy related to marketing.

Summary of Results As agricultural economists, we focus most of our attention in agricultural markets on market interactions, but many institutions and organizations exist within and alongside these markets. We consider how producers utilize these organizations and institutions and what factors contribute to this utilization. Thus far, we have conducted a survey of producers of fresh peaches and nectarines in California. In this survey, we focused primarily on marketing orders but also asked about contracting relationships and association memberships.

In our preliminary analysis, we find that producers with a large volume of stone fruit production, those with a larger percentage of their gross income from farming coming from stone fruit, and producers for whom farming is their sole occupation were less likely to vote for continuation of the marketing order, as were producers with more education (and we would expect, managerial skill). These results matched our predictions. We learned some surprising things about producers who had some organic production or market some of their output through direct sales| these growers were more likely to vote for continuation of the marketing order. This result is counter to anecdotal evidence that growers of organic and local foods are not benefited by marketing orders. We also find that farm income, which we expected to be a significant driver, was not important given our specifications. Neither was years of experience growing peaches and/or nectarines. These results suggest that the reasons producers support or oppose marketing orders may go beyond the most obvious dimensions of producer heterogeneity, such as farm size. Our analysis of these data is ongoing.

Aware of Their Surroundings: Do Farmers Self Regulate Their Pollution Contributions?

Abstract

Specific Objectives of the Project - Determine whether farmers self-regulate fumigants during periods of elevated ozone, relating this to the efficacy of “Spare the Air” days. - Provided they self-regulate, determine the extent to which they do so, and whether the presence of “Spare the Air” days in a county affect their decisions.

Project Report/Summary of Results - Although preliminary testing during the proposal stage indicated significant fumigant reductions due to elevated ozone, the effect has been identified as an artifact of existing month-dependent agricultural regulations. After controlling for months of the year, the effect becomes non-significant with magnitude zero.