Your SlideShare is downloading. ×
0
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Short-term Welfare Effects of Wheat Price Changes on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties

344

Published on

Ethiopian Development Research Institute (EDRI) and International Food Policy Research Institute (IFPRI), Seminar Series, May 24, 2012

Ethiopian Development Research Institute (EDRI) and International Food Policy Research Institute (IFPRI), Seminar Series, May 24, 2012

Published in: Technology, Business
0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
344
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
4
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Short-term Welfare Effects of Wheat PriceChanges on Farm Households in Ethiopia in the Context of Increasing Intensity of Adoption of Improved Wheat Varieties Asfaw Negassa, Menale Kassie, Bekele Shiferaw and Moti Jaleta To be Presented at National Workshop on Food Price Dynamics and Policy Implications in Ethiopia Ethiopian Development Research Institute (EDRI) 24 May, 2012 Addis Ababa, Ethiopia
  • 2. Outline of PresentationI. BackgroundII. Objectives of the StudyIII.Conceptual FrameworkIV. Empirical ModelV. Data SourceVI. Key ResultsVII.Conclusions and Implications
  • 3. I Background● Wheat is among the very important staple food crops grown in Ethiopia and also large amount of it is annually imported● Given, its importance in the national economy, the Ethiopian government has been also making large investment in agriculture sector such as in the development and extension of improved wheat technologies● Recently, the increased wheat price level and volatility have been among the important public policy issues facing developing countries like Ethiopia
  • 4. I Background (Cont.)● However, the welfare effects of wheat price changes on wheat producers in the context of increasing intensity of adoption of improved wheat varieties has not been explored so far● This has implications for the government’s effort to stimulate wheat production through the adoption of improved wheat varieties under the current conditions of increasing wheat prices –is there impact?
  • 5. I Background (Cont.)Key research questions:● Does increase in intensity improve the welfare effects of wheat price increases?● What is the threshold level of intensity of adoption of improved wheat varieties beyond which the farmers start having improved welfare effect as a results of wheat price increases?● What is the optimum level of intensity of adoption which maximizes the welfare effect of wheat price increases?
  • 6. II Objectives of the Study● The major objective of this study was to estimate the impact of adoption of improved wheat varieties on welfare effects of wheat price changes on farm households in Ethiopia. Specific objectives:● 1) To determine the impact of intensity of adoption of improved wheat varieties on likelihood of the farm households being in various net market positions (net buyer, autarkic, or net seller) of wheat, and● 2) To determine the impact of intensity of adoption of improved wheat varieties on welfare effects of price changes on farm households
  • 7. III Conceptual Framework● In standard neoclassical economic analysis, the first-order welfare effects of food price changes on households is measured using either consumer surplus or producer surplus –this assumes households are either pure producers or pure consumers● However, the agricultural households could be both producer and consumer of their own food and such single welfare measures might not adequately capture the welfare effects of price changes on agricultural households● As a result, in order to evaluate the welfare effect of price changes on agricultural households it is recommended that farm households’ income, production and consumption must be jointly considered Deaton (1989) and Budd (1993)
  • 8. III Conceptual Framework (Cont.)●
  • 9. III Conceptual Framework (Cont.)● The NBR takes in to account farmers net market position  NBR < 0 for net buyers --welfare loss (gain) in case of price increase(decrease)  NBR = 0 for autarkic households --no welfare change  NBR > 0 for net sellers --welfare gain (loss) in case of price increase (decrease)● It shows both the direction and magnitude of short- run welfare effects of price changes● We compare the NBR with independent variable of interest (for example, the intensity of adoption) to see its impact on welfare effects of price change
  • 10. III Conceptual Framework (Cont.)● However, there are two main weaknesses of NBR as a welfare measure (Deaton, 1998)  First, it only considers small price changes and may not give adequate picture of the welfare effect of large price change  Second, the effects of price changes might not just depend on amount produced or consumed but also on second order effects such as through labor wage market dynamics● In general, the NBR does not show the general equilibrium effects, or substitution effects● Therefore, in the future, there is a need to explore second-order welfare effects of wheat price changes which take in to account the households’ supply and demand responses to the price changes
  • 11. IV Empirical Model● The key challenge in empirical impact evaluation is how to remove or reduce biases in the estimated impact which could arise when there are pre-treatment differences in observed as well as unobserved covariates between control and treatment groups as a result of non-random treatment assignment● Several parametric and non-parametric econometric techniques have been developed and used to solve selection bias problem including Heckman selectivity correction, instrumental variable (IV), propensity score (PS) matching methods, and error correction (EC) approaches.
  • 12. IV Empirical Model (Cont.)● Recently, in quasi experimental setting, the use of propensity score (PS) matching has been very popular● The PS matching was developed by Rosenbaum and Rubin (1983) in order to overcome the dimensionality problem of covariate adjusting● However, the weakness of PS method is that it is binary and it does not work well in situations where the treatment variable is multivalued or continuous (Imbens, 2000; Hirano and Imbens, 2004) --the binary treatment assumes the effects are the same (homogenous) among the treatment groups receiving different treatment levels
  • 13. IV Empirical Model (Cont.)● In this paper, we utilize the generalized propensity score (GPS) matching method developed by Imbens (2000) and Hirano and Imbens (2004) in order to reduce bias in estimating the various impacts of intensity of adoption of improved wheat varieties on farm households in Ethiopia● The GPS extends the standard propensity score method developed by Rosenbaum and Rubin (1983) for binary treatment variables to the case of multi-valued or continuous treatment variables● Estimation involves three steps (technical details omitted)
  • 14. V Data Sources● For this study, cross-sectional survey data involving nationally representative 2096 sample farm households randomly selected from four major wheat growing regions in Ethiopia: Amhara, Oromiya, Southern Nations Nationalities and People (SNNP) and Tigray was used
  • 15. VI Empirical Results● Distribution of intensity of adoption of improved wheat varieties● Impacts on net wheat market positions  Net buyer  Autarkic  Net seller● Impacts on welfare effects of wheat price changes
  • 16. Figure 1 Distribution of intensity of adoption of improved wheat varieties .025 .02 .015 Density .01 .005 0 0 20 40 60 80 100 Intensity of adoption of wheat varieties (percent of total wheat area) Kernel density estimate Normal density kernel = epanechnikov, bandwidth = 8.3536
  • 17. Figure 2 Impact of intensity of adoption of improved wheat varieties on farm households’ probability of being net buyer of wheat Dose-response function Treatment effect function .15 .004 Change in probability of being net buyerProbability of being net buyer .002 .1 0 .05 -.002 0 -.004 0 20 40 60 80 100 0 20 40 60 80 100 Treatment level (intensity of adoption) Treatment level (intensity of adoption) Dose Response Lower bound Treatment Effect Lower bound Upper bound Upper bound Confidence Bounds at .95 % level Confidence Bounds at .95 % level Dose response function = Probability of positive outcome Dose response function = Probability of a positive outcome Regression command = logit Regression command = logit
  • 18. Figure 3 Impact of intensity of adoption of improved wheat varieties on farm households’ probability of being autarkic in wheat net market position Dose-response function Treatment-effect function .01 .4 Change in probability of being autarkicProbability of being autarkic .35 .005 .3 0 .25 .2 -.005 0 20 40 60 80 100 0 20 40 60 80 100 Treatment level (intensity of adoption) Treatment level (intensity of adoption) Dose Response Lower bound Treatment Effect Lower bound Upper bound Upper bound Confidence Bounds at .95 % level Confidence Bounds at .95 % level Dose response function = Probability of positive outcome Dose response function = Probability of a positive outcome Regression command = logit Regression command = logit
  • 19. Figure 4 Impact of intensity of adoption of improved wheat varieties on farm households’ probability of being net seller of wheat Dose-response function Treatment-effect function .75 .005 Change in probability of being net seller .7Probability of being net seller 0 .65 .6 -.005 .55 .5 -.01 0 20 40 60 80 100 0 20 40 60 80 100 Treatment level (Intensity of adoption) Treatment level Dose Response Lower bound Treatment Effect Lower bound Upper bound Upper bound Confidence Bounds at .95 % level Confidence Bounds at .95 % level Dose response function = Probability of positive outcome Dose response function = Probability of a positive outcome Regression command = logit Regression command = logit
  • 20. Figure 5 Impact of intensity of adoption of improved wheat varieties on farm households’ welfare effects of wheat price changes Dose-response function Treatment-effect function .3 .005 Change in net benefit ratio .2 0 Net benefit ratio .1 -.005 0 -.01 0 20 40 60 80 100 0 20 40 60 80 100 Treatment (intensity of adoption) Treatment (intensity of adoption) Dose Response Lower bound Treatment Effect Lower bound Upper bound Upper bound Confidence Bounds at .95 % level Confidence Bounds at .95 % level Dose response function = Linear prediction Dose response function = Linear prediction
  • 21. VI Conclusions and Policy Implications● The results provide strong evidence for positive but heterogeneous welfare effects of wheat price changes based on the observed different levels of intensity of adoption of improved wheat varieties● Increasing the intensity of adoption of improved wheat varieties decreases the likelihood of farmers being net buyers, decreases the likelihood of being autarkic and increases the likelihood of being net seller of wheat
  • 22. VI Conclusions and Policy Implications (Cont.) ● At initial low levels of intensity of adoption, the impacts could be low and decreasing while after certain threshold level of intensity of adoption (about 20%) was achieved, the positive welfare effects of wheat price changes increase sharply ● It is observed that the farm households need to use improved wheat varieties on about 80% of their total wheat area in order for the improved wheat varieties adoption to have maximum positive welfare effect as a result of wheat price increases
  • 23. VI Conclusions and Policy Implications (Cont.) ● Thus, given the current low level of intensity of adoption of improved wheat varieties among the farm households, there is a need to improve the farm households’ intensity of adoption of improved wheat varieties in Ethiopia ● This study also indicates that the binary variable treatment of adoption status of improved wheat varieties in impact assessment assumes that the adopters are homogeneous group in terms of their intensity of adoption and leads to inaccurate impact estimates and wrong conclusions and implications –impact varies by level of intensity of adoption
  • 24. Thank You

×