Projects Funded for 2016-2017

Economics of Precision Agriculture in High-Value California Crops

  • Julian Alston
  • Leslie (Bees) Butler


Specific Objectives of the Project:

Examine the benefits from precision agriculture technology and mechanisms of adoption in heterogeneous production environments. Studies of precision agriculture technology have traditionally been done in applications to field crops, and comparatively little research has been done on specialty crops, especially perennial crops. The objective of this study is to examine and document the emerging applications of precision agriculture technology to high-value specialty crops in California, and to demonstrate the potential benefits from adoption.

Project Report/Summary of Results (this will be posted on the Giannini Foundation website):

Over the winter quarter we employed a GSR to compile a literature review of the existing studies on the benefits of precision agriculture technology for agronomic and horticultural crops. We found that precision agriculture technologies available to agricultural producers are abundant, but studies on the economic benefits of these technologies and the rates of adoption are scarce. We decided that the best course of action for completing this project would be to supplement the review of the literature with a review of the current best practices related to the production of major horticultural crops, and, possibly, interviews with representatives of the industry to gauge the trends of adoption of major new technologies. We plan to complete this work over the summer, as it requires a more targeted approach and a slower pace.

The Effect of Healthy School Lunch Provision on Academic Test Scores

  • Michael Anderson


Specific Objectives of the Project:
Estimate the effects of different school meal vendors on academic achievement, with a particular interest in whether healthy vendors have larger impacts than other vendors.

Project Report/Summary of Results:
The project assigned each vendor in our sample a “standard” or “healthy” vendor classification based on information published by the vendors. We then estimated our main specifications and found that contracting with a healthy meal vendor increases test scores by 0.03 standard deviations (relative to keeping meal preparation “in house”). The result is highly significant and robust to the inclusion of all our available control variables. We also found 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.

Leaky Cows: Regulating Methane Emissions from California’s Dairy Sector

  • Maximilian Auffhammmer


Specific Objectives of the Project

Develop a framework for modelling different regulatory approaches to controlling methane emissions from California’s dairy sector.

Summary of Results

We have developed a simulation model that allows for different regulatory schemes controlling short lived climate pollutants from dairies. A tax, an emissions standard and a cap and trade. The model simulates the associated costs of control and provides scenarios for leakage to other states.

Trade and Food Grocery Shopping Across the U.S.

  • Thibault Fally


Specific Objectives of the Project:
Examine consumption choices of US consumers for food products from California versus products from other states and countries, and how trade costs and income affect these choices, using home and store scanner data.

Project Report/Summary of Results (this will be posted on the Giannini Foundation website):
• Relative to our initial proposal, we have worked until now on a simpler way to approximate the location of production using the distribution of sales across counties and states. Our method can be applied to a wide range of product, except those with high import penetration ratios.
• Thus, we are focusing on goods that are mainly produced in the US, focusing on the geography of sales and prices within the US. Most of our preliminary results focus on dairy products.
• Our method works well for medium-sized producers, but not as well for the largest producers. To our surprise, we found that sales by the largest producers are geographically very dispersed (for the largest producers, we will manually search for the actual location(s) of production).
• Based on our estimate of the location of production, we then examine how prices and sales vary with distance (current work in progress).
• We also examine within-US trade across households. We find that richer households tend to purchase products that are distributed more widely, across regions and distributors.

Land Use and Transportation: Technology and the Spatial Structure of Cities

  • Meredith Fowlie


Specific Objectives of the Project

This project investigated the effect of transportation technology shocks on land
development within and around cities. Reductions in transportation costs over
time have resulted in land use conversion (generally agricultural to urban, as
cities expand), leading to urban sprawl and traffic congestion. Motivated by a
rapidly transforming transportation sector (e.g. high-speed rail, uber, driverless
cars), we estimated how historical changes in transportation costs have affected
urban growth in order to inform policies that promote optimal regulation of new
expansion and development.

Summary of Results

We create a novel dataset to better understand the dynamics of city growth and
transportation: national data on housing (38 million residential real estate
transactions and housing attributes from Public Records), employment (locations
and wages from the US Census County Business Patterns), and transportation
(travel times from Google, rideshare coverage from Uber). We examined how
three changes in transportation costs - (1) the National Maximum Speed Law, (2)
gasoline prices, and (3) the rollout of Uber and Lyft - have affected the structure
of cities and land price gradients within cities. I find that real estate prices
respond quickly and significantly to transportation cost changes. Housing price
changes vary with distance from the city. While changes in marginal costs (time
and fuel) have increased prices in the suburbs and encouraged suburbanization,
ridesharing services have led to larger price increases near city-centers. Future
research will explore whether the price changes from services like Uber are
attributable to substitution away from car ownership.

Land Use Change and Carbon Costs from Demand for Wood for Bioenergy

  • Larry S. Karp


Specific Objectives of the Project:
(1) Estimate own-price demand elasticities for wood products and cross-price demand elasticities for wood alternatives in a structural model using instrumental variables.
(2) Quantify effects of increased demand for wood for bioenergy on food production and cropland availability in California, wood harvesting and planting in California, and California’s greenhouse gas emissions.

Project Report/Summary of Results:
We gathered and cleaned US region-level consumption data on quantities of intermediate wood products and end-use wood products. We then created a mapping between region-intermediate products and end uses.
We completed literature reviews of (1) papers that empirically estimate wood product elasticities, (2) forestry models and tree production functions, and (3) bioenergy papers modelling the effect of wood bioenergy use on food production and cropland availability, wood harvesting and planting, and greenhouse gas emissions.
We estimated own-price demand elasticities for wood products and cross-price demand elasticities for wood alternatives in a structural model using instrumental variables. We estimate the own-price elasticity of demand for roundwood is between -.5 and -.8. We estimate the own-price elasticity of demand for cement is -0.15.

The Value of Crop Insurance to U.S. and California

  • Ethan A. Ligon

Supply Chains, Labor, and California Agriculture

  • Philip Martin


Specific Objectives of the Project

 The average employment of hired workers in California agriculture has been rising, topping 420,000 in 2015 and almost three times the 152,000 average employment in the state’s food manufacturing industry. Almost 850,000 unique workers fill these full-time equivalent jobs, a ratio of two workers per FTE job.

This project focused on three issues in 2016-17. First was immigration, and how the stepped up enforcement promised by the Trump Administration is affecting the supply of labor to California agriculture. Second, there are few unauthorized newcomers and little follow-the-crop migrancy, so farm employers are responding with 4-S strategies, viz, satisfy, stretch, substitute, and supplement current workforces. Third, the project analyzed the likely effects of raising the state’s minimum wage to $15 an hour by 2022, requiring farmers to pay overtime after 8 hours a day or 40 a week, and the effects of buyer-imposed labor-compliance programs on fruit and vegetable growers.

The project supported a major conference April 15, 2016 at the UCD Law School that attracted over 120 participants to discuss water, labor, and immigration. Dissemination included research articles, shorter papers in ARE Update, and Rural Migration News (, which analyzes the most important farm labor and water issues facing California agriculture each quarter for over 1,000 subscribers.

Summary of Results

Farm employment has been rising as more expensive land and water is used to produce fruits and vegetables, which are more labor-intensive than the field crops they replace. Working closely with the state Employment Development Department, analysis finds that average farm employment has been rising by 10,000 a year, and the number of unique workers employed in agriculture had increased by 20,000 a year, so that in 2015 some 850,000 unique workers filled an average 420,000 farm jobs.

Meanwhile, the hired workforce on crop farms is aging (average 38) and settling, so that follow the crop migration has almost disappeared, making farm workers less flexible. Farm employers are responding with 4-S strategies, viz, satisfy, stretch, substitute and supplement. Employers try to satisfy current workers to retain them longer and stretch them with mechanical aids that increase productivity and make farm work easier. The third strategy is substitution, replacing workers with machines, or switching crops, and the fourth is to supplement with H-2A guest workers.

In the medium term, the two dominant strategies are likely to be substitution and supplement, a race between labor-saving technologies and guest worker admissions determined by labor cost trends. Policy will shape responses in particular commodities. For example, the raisin industry is likely to shrink faster as labor costs rise and some farmers mechanize while others switch to almonds. Strawberries are more likely to supplement with guest workers and use conveyor belts to stretch workers until there is a mechanization breakthrough or imports rise.

This project monitored farm labor developments for their impacts on the competitiveness of California agriculture, conducted research that was published in a variety of outlets, and made presentations to a dozen groups ranging from the CA Association of Winegrape Growers to the National Milk Producers Federation, plus talks in classes at UCD and elsewhere.

The Effect of Increased Choice on Consumer Consumption of Food

  • Jeffrey Perloff


Specific Objectives of the Project

We planned to test competing economic and psychological hypotheses on whether greater choice increases or decreases sales and welfare. We wanted to examine how consumers’ ice cream consumption adjust in response to a major change in the choice of products at a large grocery store chain, with headquarters in California.

Summary of Results

Standard economic theory argues that consumer benefit from more choices, while some psychologists have argued that more choices overwhelm consumers, resulting in reduced consumption. We used a natural experiment to test these competing hypotheses. Once a year, a major grocery chain changes its selection of ice cream. Because the chain introduces these changes at varying times across its stores, we were able to compare purchases at stores where the change had occurred to others where the change had not yet happened. Our results provide some support for the standard economic hypothesis and no support for the alternative hypothesis.

Benefits and Costs Associated with Nonlethal Depredation Efforts for Sheep and Lamb Operations in California

  • Tina Saitone


Specific Objectives of the Project

Despite increased pressure to employ nonlethal depredation efforts, sheep and lamb operations have little to no information about the benefits or costs associated with implementing one or more of these practices. Conservation biologists and animal rights activists are increasingly concerned with livestock-predator conflicts and maintaining ecosystem diversity. Yet, this comes at a cost to producers whose economic viability is threatened either by losses due to predator or by employing cost-prohibitive nonlethal depredation efforts. This purpose of this project is to quantify both the potential economic benefits associated with nonlethal depredation efforts as well as the costs associated with implementing and maintaining these systems.

Summary of Results

Sheep and lambs in California are particularly susceptible to carnivorous predators, particularly coyotes. Since 1951, the UC ANR Hopland Research and Extension Center (HREC) has been the UC system’s principal sheep research facility, with a flock of more than 500 breeding ewes in 2015. Despite use of “conventional” nonlethal and lethal predator-reduction efforts, mitigating lamb and sheep losses at Hopland has historically been a difficult management challenge. This is also true for thousands of sheep operations throughout the United States. In an attempt to limit deaths due to predators, HREC has adopted an innovative suite of nonlethal predator-prevention strategies including upgraded fencing, mob grazing, frequent pasture rotation, and guardian dogs.

While heuristically these results appear to be very favorable, to date no one has quantified and analyzed the costs associated with the use of these nonlethal predator-prevention efforts. HREC staff have documented their prevention strategies, kept an accounting of the implementation and maintenance costs, and maintained records of sheep and lamb populations and death losses. At present, we have collected and compiled these data and are in the process of using the time variation created by the sequential implementation of the various prevention strategies employed by HREC to identify the incremental benefit associated with each depredation strategy.

In the very near term, we will quantify both the benefits and the costs associated with the use of guardian dogs as a nonlethal predator prevention strategy at HREC. This information will allow ranchers to make informed decisions to improve the economic performance of their operations.

Evaluating the Resilience of Irrigated Agriculture and Groundwater Systems under Climate Change: What Role Does Crop Diversity Play?

  • Kurt Schwabe


Specific Objectives of the Project: Using a dynamic programming model of irrigated agricultural production linked to a lumped-parameter groundwater model, we:
• Investigated the impacts of increased perennial crop production regional net benefits and groundwater sustainability, and
• identified the role annual crops play in mitigating the impacts of drought and, consequently, the impacts of trends towards less annual crop cultivation on resilience to drought.

Project Report/Summary of Results (this will be posted on the Giannini Foundation website):
This study provides the first analysis within the agricultural economics literature that combines the economic dynamics of perennial crops and groundwater management, thus extending the literature on both topics. Characteristics of perennial crops include large fixed costs from planting, multi-year periods of establishment and senescence, age-dependent productivity and input requirements are all included in the model here. The resulting transitional dynamics imply a strong incentive to pump groundwater in the face of surface water reductions, with additional incentives when the price of perennials increase as the case in California’s most recent drought. A comparison of outcomes from modeling frameworks from the literature which represent perennial crops in a more simplified manner highlight how these simpler models are, by construction, limited in their ability to capture such effects and therefore may not be reliable aids for policy analysis in periods of water scarcity.
Understanding how the pressures to pump groundwater vary under different cropping systems, biophysical characteristics, and market factors is increasingly important in California as well as most regions worldwide given the pervasiveness of groundwater depletion and associated efforts to counter such overdraft. Market forces combined with interruptions to water supplies can create powerful incentives to continue pumping groundwater almost regardless of the height of the aquifer. Clearly, growers will rely on groundwater pumping as a means of protecting their investment in perennials. This highlights the need for monitoring and enforcement of groundwater pumping, such as the recently enacted Sustainable Groundwater Management Act in California (SGMA) is to be successful in limiting aquifer draw-down in California. A relevant cautionary note may be drawn from the Australian experience. While the Murray-Darling Basin Plan was intended to spread the pain of reduced surface water allocations across the basin, it has been undermined by an allegedly illegal increase in water use by irrigators in New South Wales (Keane 2019). It would be wishful thinking to imagine a similar fate is not possible, or even likely, should a major drought coincide with the deadline for implementation of SGMA in California.

Estimating the Agricultural Supply Response from Drought on the Extensive Margin in the Sacramento and San Joaquin Valley

  • David Sunding


Specific Objectives of the Project

The specific objectives of the project were three-fold. First, we enhanced the panel (longitudinal) dataset of agricultural land‐use decisions of 52 irrigation and water districts from the San Joaquin Valley for the years 2007-2015. We did so by adding the land-use decisions for approximately 200 irrigation, reclamation, water storage, and water districts. Second, we enhanced our model by modelling the extensive margin of agriculture. To do this, we will match land-use decisions within districts, and reservations at the field level year-on-year. Comparing the same field year-on-year will allow us to identify and isolate drought-induced deviations from normal cropping rotations. This approach is novel, and will allow for the first estimation of how drought impacts the extensive margin of agriculture. Third, we are in the process of refining the empirical model which will be used to estimate land‐use and crop changes under different water allocations. The results are preliminary, and the project is ongoing. We will update the data with crop acreage data each year. This model will be used to conduct agricultural policy analysis for the San Joaquin Valley via simulation exercises as soon as the

Summary of Results

This project estimates the effect of changes in surface water availability on the probability of a crop experiencing a given crop transition in the Central Valley of California using detailed data on crop production acreage in the Sacramento and San Joaquin Valley and Central Valley and State Water Project surface water allocations 2007-2015. We estimate the effect of water availability on transition probabilities using linear probability models (LPM) for each transition. We use a Difference-in-Differences estimator by comparing fields in irrigation districts against a plausible control group of fields located outside of irrigation districts. We exploit residual variation in water availability from administrative water allocation decisions to estimate the probability of switching from one crop to another. We find that Northern irrigation districts increase (decrease) acreage from field-to-rice, fallow-to-rice, in response to an increase (decrease) in surface water availability. Southern irrigation districts decrease (increase) acreage from fallow-to-fallow and tomatoes-to-fallow with an increase (decrease) in surface water availability. Additionally, Southern irrigation districts increase (decrease) Alfalfa-to-alfalfa acreage in response to an increase (decrease) in water availability. All of our findings are consistent with the intuition that farmers substitute away from more water intensive crops to less water intensive crops following a decrease in water availability as the marginal cost of water has increased making it more expensive to irrigate.

Demand for Brands, Private Labels: Revealed Preferences and Experimental Evidence

  • Sofia Villas-Boas


Specific Objectives of the Project:
This project empirically investigates consumer demand for brands, private labels, and generics. We use a reduced form model to investigate consumer demand changes when information about generics versus brand name is provided at the point of purchase. We also reveal the share of consumers in a store purchasing generics and assess whether a larger peer group presence of generic purchases sways consumers to also try out generics.

Project Report/Summary of Results:
Using a field experiment we empirically investigate factors that may explain why consumers do not buy cheaper private label alternatives to brands. Our approach is reduced form and we use a difference in difference strategy. We estimate the effect of each treatment on total purchasing and on generic share, using a set of comparable untreated stores as control.
There were three treatments implemented: (1) Enhance the point that generics are “the same” (and here effects are not statistically significant) ; (2) Making price differences more visible (salient) causes significant increases in generic share and the entire effect is driven by customers with previous generics purchase history, (3) Informing people about generic purchasing propensity of others causes increases in generic share that are large in magnitude.
The category used is a first step towards implementing similar treatments in a wider and more heterogenous set of categories such as staple foods.

Using Micro Geoengineering for Adaptation to Climate Change in Agriculture

  • David Zilberman


Specific Objectives of the Project

1. To develop a conceptual framework for assessing the value of geoengineering techniques, in this case modifying weather on the level of a tree crop, to adapt to the effects of climate change.
2. To apply the use of kaolin clay to enhance the chill portions necessary for adequate bloom out, which ultimately drives yield.
3. Conduct a literature review and interview Farm Advisors to obtain quantitative parameters for current technology practices and allocation of inputs in response to shorter chill portions.
4. To assess the economic benefit of this technology under various climate scenarios in the Central Valley of California.

Summary of Results

Climate change is likely to increase temperatures in California in a manner that will affect crop productivity. Already we have seen increases in winter temperatures that reduce chill factor, which is essential for blooming of fruits and nuts. Insufficient chill can result in drastic impacts on yield. One approach to deal with it is through micro-climate engineering, namely lowering the temperature around the tree during its dormancy before blooming. Farmers and extension developed a technique where they spray orchards with a clay-like substance (kaolin) to reduce solar radiation. This micro-climate engineering technique is estimated to reduce losses.

Our project developed a methodology to predict the impact of this adaptation technique applied to the case of pistachios. One of the challenges is that temperature throughout a season is a random variable and varies over space and location. Working with agronomists, we obtained estimates of the costs and impacts of kaolin application under different scenarios, and then estimated the future expected discounted gains from application of kaolin to pistachios over various time periods. Our analysis takes into account the growth, demand and supply of pistachios, and possible changes in acreage as part of adaptation to climate change.

Our results suggest that in 2030, expected annualized profit gains from micro-climate engineering in California pistachios is between $214 to 612 million, depending on the growth in demand and the extent of adaptation. But consumers gain much more, $643 million to $1.84 billion, through lower prices and increased consumption. These impacts are significant given that the revenue of the industry is between $1 to $2 billion annually. Expected gains are higher if variability is increasing, and the early results suggest that micro-climate engineering may benefit other crops and address other sources of losses as well.