Terry Roe | University of Minnesota (original) (raw)

Papers by Terry Roe

High-value agricultural products such as processed foods are becoming increasingly important in U... more High-value agricultural products such as processed foods are becoming increasingly important in U.S. production and trade. Efficiency gains in primary agriculture are transferred to the processed-food sector in the form of cheaper inputs. In turn, efficiency gains in processed-food sectors are transferred, in part, back to primary agriculture by increasing the derived demand and, thus, mitigating commodity price declines. Efficiency gains are relatively more important in primary agriculture than in food processing. Policies that encourage productivity growth and lower production costs will tend to increase the competitiveness of both sectors. Since almost all of the productivity growth in primary agriculture and food processing are passed along in lower prices, consumers are the ultimate beneficiaries.

The paper questions why agricultural trade compromise between the USA and EC is so difficult, whe... more The paper questions why agricultural trade compromise between the USA and EC is so difficult, whether a compensatory scheme be found that is both politically feasible and resource saving, and whether liberalizing policies by selected OECD countries will ease a trade compromise. These questions are addressed in a political economy context since, if the influence of special interests is ignored, trade compromises that both save resources and are politically feasible are unlikely to be searched for or found. The analysis entails the estimation of political preference weights, game theory, and a partial equilibrium world trade model based on 1988 data. The general answers are: the most influential special-interest groups face economic losses that, when coupled with their influence, tend to prevent a broad-based trade compromise given the current set of policy instruments; partial trade liberalization can occur if instruments are decoupled from production incentives, but free trade does ...

American Journal of Agricultural Economics, 1990

I begin with a discussion of the Carter, Gray, and Furtan paper and then turn to Orden's pape... more I begin with a discussion of the Carter, Gray, and Furtan paper and then turn to Orden's paper. I conclude with only a few remarks on VillaIssa's paper. First, I take exception to the conceptual framework in CGF, not because the framework is incorrect, nor does it necessarily alter the conclusions drawn from their empirical results. Instead, the approach (their fig. 1) ignores the importance of capital markets in exchange rate determination, while the others, figures 2 and 3, illustrate the problem of casting questions of exchange rates into a partial equilibrium framework. The Slater model is a model of the current

American Journal of Agricultural Economics, 2003

Empirical findings for a panel of around 100 countries from 1960 to 1990 strongly support the gen... more Empirical findings for a panel of around 100 countries from 1960 to 1990 strongly support the general notion of conditional convergence. For a given starting level of real per capita GDP, the growth rate is enhanced by higher initial schooling and life expectancy, lower fertility, lower government consumption, better maintenance of the rule of law, lower inflation, and improvements in the terms of trade. For given values of these and other variables, growth is negatively related to the initial level of real per capita GDP. Political freedom has only a weak effect on growth but there is some indication of a nonlinear relation. At low levels of political rights, an expansion of these rights stimulates economic growth. However, once a moderate amount of democracy has been attained, a further expansion reduces growth. In contrast to the small effect of democracy on growth, there is a strong positive influence of the standard of living on a country's propensity to experience democracy.

American Journal of Agricultural Economics, 1991

Capital market integration has increased the scale and mobility of capital movements within and a... more Capital market integration has increased the scale and mobility of capital movements within and among nations to unprecedented levels. Integration is fairly recent. Frankel concludes from his review of the literature that barriers in the major world financial markets were sufficiently low that by 1989, financial markets could be viewed as being fully integrated.' The scale and mobility of capital flows among nations has numerous implications to currency values, interest rates, wealth, and, through current capital account linkages, to relative product and factor prices. Capital flows that have real economic effects also affect the functioning of policy instruments and how effective they are in remunerating an interest group at the expense, if any, of others. This paper provides insights into the process and linkages by which the integration of capital markets has altered economic policy through interest group pressures on government. If economic policy is viewed as the outcome of interest groups seeking through the power of the state that which cannot be provided by the market alone, then capital market adjustments that affect the return to policy instruments can also affect the returns to lobbying resources and, hence, the balance of political influence among the various groups.2 This type of explanation for economic policy has been forwarded under the rubric of models of "rent seeking" (Krueger 1974).3 The paper is organized as follows.4 Selected historical evidence linking capital markets to pressures for legislation in the United States and other countries is briefly reviewed. In some cases, capital market adjustments have eased pressures for protection, while, in other cases, adjustments either forced policy change because of a liquidity constraint or made unprofitable the lobbying for sustaining policy in face of these adjustments. The discussion in the next section provides deeper insight into capital market-lobbying linkages. Discussion focuses on the results from a simple model of rent seeking, where government intervenes in markets and provides sector-specific public goods.

Current projections indicate that by 2025, water scarcity will affect over one quarter of the wor... more Current projections indicate that by 2025, water scarcity will affect over one quarter of the world's population. This suggests that the need to manage water more efficiently will become more pressing during the next few years as the demand for water increases along with the expansion of economies and their populations. This paper investigates the economic impacts of efficient intraregional and/or interregional water reallocation, and examines their corresponding economic gains. A Ramsey-type growth model of a small, open, competitive economy is fitted to year 2000 Chinese data andthe empirical model is used to perform policy experiments. Within region water reallocation increases per-capita Chinese GDP by about 1.5% per year over the period 2000-2060. The aggregate potential welfare gain due to this reallocation is 1002.51 billion RMB. Transferring water from southern to northern China via the South-North Water Transfer Project, on average, has a smaller impact on per-capita GDP over the period 2000-2060, with an aggregate welfare gain of 557.23 billion RMB. Combining intra-regional and interregional water reallocations, on average, increases per-capita GDP by 0.38% per year over the period and the aggregate welfare gain from this combination is 1148.06 billion RMB.

South African Journal of Economic and Management Sciences, 2004

This paper focuses on the interdependence between international trade and institutional reform an... more This paper focuses on the interdependence between international trade and institutional reform and suggests that the trade barriers erected by advanced countries on the agricultural exports of poor countries, in particular sub-Saharan agriculture, serve as an impediment to economic growth and development. Drawing upon recent literature, the suggestion is that trade barriers inhibit institutional reform that is a major factor affecting economic growth. An empirical analysis of trade reform and economic growth shows that sub-Saharan economies can reciprocate potential gains from increased trade, which are larger when an integration with world markets induces institutional reform. JEL Q17

A non-technical overview of the new growth theory is provided from both an analytical and empiric... more A non-technical overview of the new growth theory is provided from both an analytical and empirical perspective. Following a brief analytical sketch of the R&D based models, the results from fitting two structural models to data are presented. Results show the relative impacts on growth from trade and R&D based policies including technological spillovers from trade. The mechanism of inter-sectoral adjustments to the long-run growth path is also discussed. While the theory provides new insights into growth, some skepticism is raised as to its general applicability as an important structure in policy models. The need to apply behaviorally consistent dynamic models, e.g., of the Ramsey genre, to empirically based policy models is strongly supported.

This paper focuses on the private and social rates of return to R&D capital in the three vertical... more This paper focuses on the private and social rates of return to R&D capital in the three vertically linked sectors, primary agriculture, food processing, and farm machinery and equipment. Evidence supporting a divergence between these rates is found for primary agriculture and food processing. Using a cost function approach, the private rates of return to R&D capital ranged from an average of 10.2% per annum for food processing to 22.3% for farm machinery and equipment. In the case of agriculture, the direct return to public R&D averaged 37.3% per annum. The social rates of return to R&D capital in agriculture and food processing are significantly larger than the private rates due to the existence of spillovers. While the divergence between rates is small in the farm machinery and equipment sector, its high direct rate may suggest relatively large intra-sector spillovers. We find that spillovers from public agricultural R&D to food processing exceeds the spillovers from food processing to the other two sectors. Thus, to a degree, public R&D in agriculture mitigates the market's failure in food processing to fully appropriate the returns to their R&D capital.

Environment and Development Economics, 1997

There is increasing concern that the intensification of cereal production in northern Nigeria is ... more There is increasing concern that the intensification of cereal production in northern Nigeria is threatening the sustainability of the agricultural environment. This article describes the effects of trade restrictions on grain imports and of fertilizer subsidy on households' decisions, and draws implications for degradation of the agricultural environment. It develops social accounting matrices (SAMs) for two household types as the basis for capturing the structure of resource allocation, cropping choices, and input use, and then uses the SAM to simulate household responses to changes in relative grain prices and fertilizer prices. Both simulations, but particularly the fertilizer price change, favour the shift from cereals to legumes. A third simulation reflecting technical change in legumes results in the largest shifts from cereals to legumes. It is concluded that appropriate policy reforms complemented by technical change will increase diversification of the cropping system ...

Effects of economy-wide factors on Brazilian economic growth and biofuels production: an inter-te... more Effects of economy-wide factors on Brazilian economic growth and biofuels production: an inter-temporal general equilibrium analysis

Miscellaneous Publications, 2015

This report is an application of the conceptual model detailed in UNEP, Ecosystem Service Economi... more This report is an application of the conceptual model detailed in UNEP, Ecosystem Service Economic Working Paper No. 20, "Ecosystem Services and the Macroeconomy: A Review of Linkages and Evaluation of Analytical Tools".

Removing trade barriers, subsidies, and other trade distortions forms of support will cause aggre... more Removing trade barriers, subsidies, and other trade distortions forms of support will cause aggregate world prices of agricultural commodities to rise by over 11 percent relative to an index of all other prices. Agricultural support and protection in developed countries is the major cause of low agricultural prices, and implicitly, a tax on net agricultural exporters in developing countries. The reform of agricultural policies would likely increase livestock product prices more than any other commodity. Reform increases world trade in agricultural commodities, but leaves the level of total agricultural production almost unchanged. In the short to medium term, some net agricultural importing countries suffer a welfare loss due to an adverse change in their terms of trade that reform causes. In the longer-run, however, agricultural policy reform benefits almost all countries, and developing countries in particular, due to the change reform induces in the developing countries’ investme...

HIV prevalence dynamics are introduced into a three sector, neoclassical growth model. The model ... more HIV prevalence dynamics are introduced into a three sector, neoclassical growth model. The model is calibrated to South African national accounts data and used to examine the potential impact of HIV/AIDS on economic growth. Projections portend that, if left unchecked, the long run impact of HIV/AIDS could cause South African GDP to be about 60% less than would be the level of GDP in the absence of the disease. In spite of a relatively high death rate, the disease is also found to decrease the per capita level of GDP, due mostly to a decline in labor productivity and a corresponding slower growth in capital deepening. JEL Classification: I19, O11, O41, O55 ∗Professor and Associate Professor, respectively, Department of Applied Economics, University of Minnesota, St. Paul, MN. Senior authorship is not assigned. email: troe @umn.edu; smith142@umn.edu †We are grateful to Andre Jooste, Germano Mwabu, Haroumi Nelson, and Chris Udry for helpful comments on earlier versions of this paper. M...

agricultural research centers that receive principal funding from governments, private foundation... more agricultural research centers that receive principal funding from governments, private foundations, and international and regional organizations, most of which are members of the Consultative Group on International Agricultural Research (CGIAR). FINANCIAL CONTRIBUTORS AND PARTNERS IFPRI’s research, capacity strengthening, and communications work is made possible by its financial contributors and partners. IFPRI gratefully acknowledges generous unrestricted funding from Australia

High-value agricultural products such as processed foods are becoming increasingly important in U... more High-value agricultural products such as processed foods are becoming increasingly important in U.S. production and trade. Efficiency gains in primary agriculture are transferred to the processed-food sector in the form of cheaper inputs. In turn, efficiency gains in processed-food sectors are transferred, in part, back to primary agriculture by increasing the derived demand and, thus, mitigating commodity price declines. Efficiency gains are relatively more important in primary agriculture than in food processing. Policies that encourage productivity growth and lower production costs will tend to increase the competitiveness of both sectors. Since almost all of the productivity growth in primary agriculture and food processing are passed along in lower prices, consumers are the ultimate beneficiaries.

The paper questions why agricultural trade compromise between the USA and EC is so difficult, whe... more The paper questions why agricultural trade compromise between the USA and EC is so difficult, whether a compensatory scheme be found that is both politically feasible and resource saving, and whether liberalizing policies by selected OECD countries will ease a trade compromise. These questions are addressed in a political economy context since, if the influence of special interests is ignored, trade compromises that both save resources and are politically feasible are unlikely to be searched for or found. The analysis entails the estimation of political preference weights, game theory, and a partial equilibrium world trade model based on 1988 data. The general answers are: the most influential special-interest groups face economic losses that, when coupled with their influence, tend to prevent a broad-based trade compromise given the current set of policy instruments; partial trade liberalization can occur if instruments are decoupled from production incentives, but free trade does ...

American Journal of Agricultural Economics, 1990

I begin with a discussion of the Carter, Gray, and Furtan paper and then turn to Orden's pape... more I begin with a discussion of the Carter, Gray, and Furtan paper and then turn to Orden's paper. I conclude with only a few remarks on VillaIssa's paper. First, I take exception to the conceptual framework in CGF, not because the framework is incorrect, nor does it necessarily alter the conclusions drawn from their empirical results. Instead, the approach (their fig. 1) ignores the importance of capital markets in exchange rate determination, while the others, figures 2 and 3, illustrate the problem of casting questions of exchange rates into a partial equilibrium framework. The Slater model is a model of the current

American Journal of Agricultural Economics, 2003

Empirical findings for a panel of around 100 countries from 1960 to 1990 strongly support the gen... more Empirical findings for a panel of around 100 countries from 1960 to 1990 strongly support the general notion of conditional convergence. For a given starting level of real per capita GDP, the growth rate is enhanced by higher initial schooling and life expectancy, lower fertility, lower government consumption, better maintenance of the rule of law, lower inflation, and improvements in the terms of trade. For given values of these and other variables, growth is negatively related to the initial level of real per capita GDP. Political freedom has only a weak effect on growth but there is some indication of a nonlinear relation. At low levels of political rights, an expansion of these rights stimulates economic growth. However, once a moderate amount of democracy has been attained, a further expansion reduces growth. In contrast to the small effect of democracy on growth, there is a strong positive influence of the standard of living on a country's propensity to experience democracy.

American Journal of Agricultural Economics, 1991

Capital market integration has increased the scale and mobility of capital movements within and a... more Capital market integration has increased the scale and mobility of capital movements within and among nations to unprecedented levels. Integration is fairly recent. Frankel concludes from his review of the literature that barriers in the major world financial markets were sufficiently low that by 1989, financial markets could be viewed as being fully integrated.' The scale and mobility of capital flows among nations has numerous implications to currency values, interest rates, wealth, and, through current capital account linkages, to relative product and factor prices. Capital flows that have real economic effects also affect the functioning of policy instruments and how effective they are in remunerating an interest group at the expense, if any, of others. This paper provides insights into the process and linkages by which the integration of capital markets has altered economic policy through interest group pressures on government. If economic policy is viewed as the outcome of interest groups seeking through the power of the state that which cannot be provided by the market alone, then capital market adjustments that affect the return to policy instruments can also affect the returns to lobbying resources and, hence, the balance of political influence among the various groups.2 This type of explanation for economic policy has been forwarded under the rubric of models of "rent seeking" (Krueger 1974).3 The paper is organized as follows.4 Selected historical evidence linking capital markets to pressures for legislation in the United States and other countries is briefly reviewed. In some cases, capital market adjustments have eased pressures for protection, while, in other cases, adjustments either forced policy change because of a liquidity constraint or made unprofitable the lobbying for sustaining policy in face of these adjustments. The discussion in the next section provides deeper insight into capital market-lobbying linkages. Discussion focuses on the results from a simple model of rent seeking, where government intervenes in markets and provides sector-specific public goods.

Current projections indicate that by 2025, water scarcity will affect over one quarter of the wor... more Current projections indicate that by 2025, water scarcity will affect over one quarter of the world's population. This suggests that the need to manage water more efficiently will become more pressing during the next few years as the demand for water increases along with the expansion of economies and their populations. This paper investigates the economic impacts of efficient intraregional and/or interregional water reallocation, and examines their corresponding economic gains. A Ramsey-type growth model of a small, open, competitive economy is fitted to year 2000 Chinese data andthe empirical model is used to perform policy experiments. Within region water reallocation increases per-capita Chinese GDP by about 1.5% per year over the period 2000-2060. The aggregate potential welfare gain due to this reallocation is 1002.51 billion RMB. Transferring water from southern to northern China via the South-North Water Transfer Project, on average, has a smaller impact on per-capita GDP over the period 2000-2060, with an aggregate welfare gain of 557.23 billion RMB. Combining intra-regional and interregional water reallocations, on average, increases per-capita GDP by 0.38% per year over the period and the aggregate welfare gain from this combination is 1148.06 billion RMB.

South African Journal of Economic and Management Sciences, 2004

This paper focuses on the interdependence between international trade and institutional reform an... more This paper focuses on the interdependence between international trade and institutional reform and suggests that the trade barriers erected by advanced countries on the agricultural exports of poor countries, in particular sub-Saharan agriculture, serve as an impediment to economic growth and development. Drawing upon recent literature, the suggestion is that trade barriers inhibit institutional reform that is a major factor affecting economic growth. An empirical analysis of trade reform and economic growth shows that sub-Saharan economies can reciprocate potential gains from increased trade, which are larger when an integration with world markets induces institutional reform. JEL Q17

A non-technical overview of the new growth theory is provided from both an analytical and empiric... more A non-technical overview of the new growth theory is provided from both an analytical and empirical perspective. Following a brief analytical sketch of the R&D based models, the results from fitting two structural models to data are presented. Results show the relative impacts on growth from trade and R&D based policies including technological spillovers from trade. The mechanism of inter-sectoral adjustments to the long-run growth path is also discussed. While the theory provides new insights into growth, some skepticism is raised as to its general applicability as an important structure in policy models. The need to apply behaviorally consistent dynamic models, e.g., of the Ramsey genre, to empirically based policy models is strongly supported.

This paper focuses on the private and social rates of return to R&D capital in the three vertical... more This paper focuses on the private and social rates of return to R&D capital in the three vertically linked sectors, primary agriculture, food processing, and farm machinery and equipment. Evidence supporting a divergence between these rates is found for primary agriculture and food processing. Using a cost function approach, the private rates of return to R&D capital ranged from an average of 10.2% per annum for food processing to 22.3% for farm machinery and equipment. In the case of agriculture, the direct return to public R&D averaged 37.3% per annum. The social rates of return to R&D capital in agriculture and food processing are significantly larger than the private rates due to the existence of spillovers. While the divergence between rates is small in the farm machinery and equipment sector, its high direct rate may suggest relatively large intra-sector spillovers. We find that spillovers from public agricultural R&D to food processing exceeds the spillovers from food processing to the other two sectors. Thus, to a degree, public R&D in agriculture mitigates the market's failure in food processing to fully appropriate the returns to their R&D capital.

Environment and Development Economics, 1997

There is increasing concern that the intensification of cereal production in northern Nigeria is ... more There is increasing concern that the intensification of cereal production in northern Nigeria is threatening the sustainability of the agricultural environment. This article describes the effects of trade restrictions on grain imports and of fertilizer subsidy on households' decisions, and draws implications for degradation of the agricultural environment. It develops social accounting matrices (SAMs) for two household types as the basis for capturing the structure of resource allocation, cropping choices, and input use, and then uses the SAM to simulate household responses to changes in relative grain prices and fertilizer prices. Both simulations, but particularly the fertilizer price change, favour the shift from cereals to legumes. A third simulation reflecting technical change in legumes results in the largest shifts from cereals to legumes. It is concluded that appropriate policy reforms complemented by technical change will increase diversification of the cropping system ...

Effects of economy-wide factors on Brazilian economic growth and biofuels production: an inter-te... more Effects of economy-wide factors on Brazilian economic growth and biofuels production: an inter-temporal general equilibrium analysis

Miscellaneous Publications, 2015

This report is an application of the conceptual model detailed in UNEP, Ecosystem Service Economi... more This report is an application of the conceptual model detailed in UNEP, Ecosystem Service Economic Working Paper No. 20, "Ecosystem Services and the Macroeconomy: A Review of Linkages and Evaluation of Analytical Tools".

Removing trade barriers, subsidies, and other trade distortions forms of support will cause aggre... more Removing trade barriers, subsidies, and other trade distortions forms of support will cause aggregate world prices of agricultural commodities to rise by over 11 percent relative to an index of all other prices. Agricultural support and protection in developed countries is the major cause of low agricultural prices, and implicitly, a tax on net agricultural exporters in developing countries. The reform of agricultural policies would likely increase livestock product prices more than any other commodity. Reform increases world trade in agricultural commodities, but leaves the level of total agricultural production almost unchanged. In the short to medium term, some net agricultural importing countries suffer a welfare loss due to an adverse change in their terms of trade that reform causes. In the longer-run, however, agricultural policy reform benefits almost all countries, and developing countries in particular, due to the change reform induces in the developing countries’ investme...

HIV prevalence dynamics are introduced into a three sector, neoclassical growth model. The model ... more HIV prevalence dynamics are introduced into a three sector, neoclassical growth model. The model is calibrated to South African national accounts data and used to examine the potential impact of HIV/AIDS on economic growth. Projections portend that, if left unchecked, the long run impact of HIV/AIDS could cause South African GDP to be about 60% less than would be the level of GDP in the absence of the disease. In spite of a relatively high death rate, the disease is also found to decrease the per capita level of GDP, due mostly to a decline in labor productivity and a corresponding slower growth in capital deepening. JEL Classification: I19, O11, O41, O55 ∗Professor and Associate Professor, respectively, Department of Applied Economics, University of Minnesota, St. Paul, MN. Senior authorship is not assigned. email: troe @umn.edu; smith142@umn.edu †We are grateful to Andre Jooste, Germano Mwabu, Haroumi Nelson, and Chris Udry for helpful comments on earlier versions of this paper. M...

agricultural research centers that receive principal funding from governments, private foundation... more agricultural research centers that receive principal funding from governments, private foundations, and international and regional organizations, most of which are members of the Consultative Group on International Agricultural Research (CGIAR). FINANCIAL CONTRIBUTORS AND PARTNERS IFPRI’s research, capacity strengthening, and communications work is made possible by its financial contributors and partners. IFPRI gratefully acknowledges generous unrestricted funding from Australia