We use both Granger-causality and instrumental variables (IV) methods to examine the impact of index fund positions on price returns for the main US grains and oilseed futures markets. Our analysis supports earlier conclusions that Granger-causal impacts are generally not discernible. However, market microstructure theory suggests trading impacts should be instantaneous. IV-based tests for contemporaneous causality provide stronger evidence of price impact. We find even stronger evidence that changes in index positions can help predict future changes in aggregate commodity price indices. This result suggests that changes in index investment are in part driven by information which predicts commodity price changes over the coming months.
The demand for donkey hides for ejiao, a Traditional Chinese Medicine, has resulted in rapidly increasing prices for donkey hides and donkeys. This has put pressure on donkey populations globally and has implications for donkey welfare and the livelihoods of those who rely on donkeys as working animals. The aim of the research was to explore the feasibility of setting up new donkey farming systems to supply the rising demand for ejiao using a system dynamics model of donkey production. Results show that the size of the initial female breeding herd, reproductive performance, age of reproduction, percentage of female births and average breeding life of donkeys are key variables affecting the time to build up the donkey population to supply the demand for hides, which will be at least ten to fifteen years. The implications of this are: (i) prices for donkey hides will continue to increase, (ii) companies producing ejiao will use other ingredients, (iii) China will continue to source donkey hides from around the world, and (iv) there will be continued theft and illegal trade of donkeys and concerns for rural households reliant on donkeys for their livelihoods and adverse impacts on donkey welfare.
This chapter quantifies the extent of financialization of food commodity markets over the period since 2000 and analyzes impacts of this process. We look specifically at food price bubbles, price volatility and price comovement. We reject the view that financialization has been responsible for high and volatile food commodity prices but also reject the view that financialization has not had any effects on these markets. Trades originated by financial actors, and specifically index investors, can move prices but tend typically to be volatility-reducing. The widelycommented increased comovement, which relates to oil prices but not to equity prices, appears more likely to have resulted from the use of food commodities as biofuels feedstocks than from financialization. This paper is forthcoming as a chapter in R. Jha, T. Gaiha and A. Deolalikar (eds.), Handbook on Food: Demand, Supply, Sustainability and Security. We are grateful to a referee for helpful comments.
Economics takes an individualistic approach to human behaviour. This is reflected in the use of ‘contingent valuation’ surveys to conduct cost benefit analysis for economic policy evaluation. An individual’s valuation of a policy is assumed to be unaffected by the burdens it places on others. We report a survey experiment to test this supposition in the context of climate change policy. Willingness to pay for climate change mitigation was higher when richer individuals were to bear higher costs than when, as is usual, no explicit information was provided about cost distribution. This result is inconsistent with the usual interpretation of contingent valuation data. It also suggests that the data may be biased indicators of policy acceptance. Additional survey questions suggest that a collective mode of reasoning is common.
We define and experimentally test a public provision mechanism that meets three basic ethical requirements and allows community members to influence, via monetary bids, which of several projects is implemented. For each project, participants are assigned personal values, which can be positive or negative. We provide either complete or only private information about others' personal values. This produces two distinct public provision games which are experimentally implemented and analysed for various projects. In spite of the complex experimental task, participants do not rely on truth-telling as an obvious and simple heuristic whose general acceptance would result in fair and efficient outcomes. Rather, they yield to strategic underbidding. Although underbidding is affected by projects' characteristics, the provision mechanism seems quite functional.JEL classification: C91; C72; D63.
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