2006+Midterm

MID-TERM EXAMINATION

Economics 106

World Food Economy

February 7, 2006 Rosamond L. Naylor

Walter P. Falcon

This is a closed book, closed note examination. Answer all questions. Please use one bluebook per question, please write legibly (you do not want to win the Econ 106 “worst handwriting award”), and please also sign the honor code on at least one blue book. This exam is worth 100 points—approximately one point per minute. However, you may have until 12:50 pm to complete the exam if you wish.

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1. (25 points). Technical change within agriculture appears to be a dominant component of rural welfare, whatever the income level of the country. In this connection:

a. (9 points). Define labor productivity and total factor productivity in

agriculture. As a matter of logic, must both of these concepts have the same sign? If yes, why; if not, describe a plausible scenario where

their signs might be opposite. Using the U.S. (or if you like, another

specific country) what are the approximate magnitudes (in per cent per year) of labor and total factor productivities in agriculture during the

past 50 years?

b. (6 points). Describe some of the empirical difficulties in measuring total

factor productivity in agriculture over long periods.

c. (10 points). The Green Revolution represents one important episode

with technical change. When did the Green Revolutions occur and

what were its key features? When scientists describe the Green

Revolution as resulting in embodied technology, what do they mean?

Define “induced innovation”, and indicate whether or not you think that the Green Revolution is a good example of that concept.

2. (20 points). Assume that you are a farmer who owns half a hectare in a small land-locked country. Your country is excluded from international agricultural trade because of poor infrastructure. Assume further that for many years you have grown a crop of sweet potatoes, a key starchy staple for poor people in the country.

a. (10 points). Assume that a serious storm in a nearby region of the

country ruins 20% of the national sweet potato crop, leading to an

increase in the market price for sweet potatoes. Select (and defend) a reasonable national (own) price elasticity of demand and an (own) price elasticity of supply for sweet potatoes. Using these elasticities, how

much would you increase your sweet potato production in the coming

season? (Please show your calculations.)

b. (10 points). In order to increase your production, you increase the

amount of fertilizer you apply. Illustrate and explain your decision-

making process by using one or more appropriate graphs. Show (also with the graph(s)) how the decision might change if a new high-yielding sweet potato variety were also introduced in the upcoming year.

3. (30 points). In 1975, Tuland was a large, very poor country. Per-capita incomes in the country hovered around $200, and most of the country’s citizens were involved in farming.

a. (5 points). Define Bennett’s Law. What would it suggest about the

composition of diets in Tuland in 1975?

b. (5 points). Between 1975 and 2000, in what must be the greatest

development story in human history, Tuland experienced annual per-

capita income growth of 10%. Using an appropriate graph, describe

what might have happened to the composition of Tulandian diets over

the 1975-2000 period. What “food law” underlies your graph?

c. (8 points). In 2000, the population of Tuland is 500 million people, and

the Tulandian diet has grown to about 3000 calories a day. 20% of this diet now comes from pig meat, with the rest coming from grain.

Assuming that all Tulandian pigs are themselves fed entirely on grain,

about how much total grain is consumed by Tuland over the course of a year? (Assume pigment contains 3000 calories/kg., and that grain

contains 3500 calories per kg.)

d. (5 points). Given your knowledge of the rapid structural change

currently occurring in the global livestock sector, describe what pig

production in Tulandia would have looked like in 1975 as compared to what it might look like today.

e. (7 points). In 2005, a pig flu virus strikes Tuland. Fearing for their lives,

Tulandians abandon meat consumption entirely and consume their

3000 calories directly from grain. In theory, about how many people in other countries could live on the reduction in total grain consumption

associated with Tulandians’ newfound vegetarianism? Would the

number of malnourished people actually fall? Why or why not?

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4. (25 points). China is in the midst of rapid structural transformation. Yield growth in the primary staples (rice, wheat, and corn) is averaging 2% per annum, but has fallen from an earlier period of 4-5% annual growth. With 200 million rural households, all of whom own at least a tiny piece of land, maintaining agricultural growth is key for rural poverty alleviation. Government officials are troubled by the fact that rural income growth, at about 4% per annum, is half or less that of urban and industrial income growth. Although rural income growth remains high by international standards, many households still live on less than $1/day.

a. (7 points). Define structural transformation, describe its main

stages, and discuss where China now fits in the transformation

process.

b. (6 points). Based on your reading, is China going through the

same transformation process as Japan, South Korea, and Taiwan

did earlier? How does it differ, and how is it the same?

c. Evaluate the following initiatives, based on what we have

discussed in class, for Chinese officials at this stage in

development:

i. (4 points) Encouraging migration from rural areas to urban

centers;

ii. (4 points) Reforming the rural land market to allow farmers to sell and rent out their land, and to farm larger land

holdings;

iii. (4 points) Providing income subsidies to rural agricultural

producers.

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