Precipitation and political determinism

Or, as Tyler Cowen puts it, a rainfall theory of democracy:

Why have some countries remained obstinately authoritarian despite repeated waves of democratization while others have exhibited uninterrupted democracy? This paper explores the emergence and persistence of authoritarianism and democracy. We argue that settled agriculture requires moderate levels of precipitation, and that settled agriculture eventually gave birth to the fundamental institutions that under-gird today’s stable democracies.

... and now brace yourself for the awesome use of econometrics...

An instrumental variables approach demonstrates that while low levels of rainfall cause persistent autocracy and high levels of rainfall strongly favor it as well, moderate rainfall supports stable democracy. This econometric strategy also shows that rainfall works through the institutions of the modern territorial state borne from settled agriculture, institutions that are proxied for by low levels of contemporary tribalism.

Implications of agricultural elasticities

Michael Roberts summarizes one of his latest projects in three minutes (speaking time). For those not enamored of econometrics (e.g. why he uses weather as an instrument), his conclusion is:

Globally the demand elasticity for these crops combined is about 0.05 and the supply elasticity is about 0.10, perhaps a little larger. Both of these elasticities are far greater than they would be if estimated using traditional econometric methods that do not account for the joint-dependency of prices on supply and demand. If applied to US ethanol policy, they suggest US ethanol subsidies have caused about a 30% increase in prices for these key commodities and about a 35 million acre expansion of cropland worldwide. That's about the size of North Carolina, the state where I live.

A 30% price increase from biofuels alone is quite substantial. If I recall correctly, IFPRI estimated that biofuels accounted for 30% of the total recent rise in food prices (note the distinction from the absolute 30% implied by Michael's work). Other estimates varied widely, going up to 75% of the total rise in an unreleased but leaked World Bank report that caused quite a bit of controversy.

This also reminds me how inelastic demand makes farmers oppose climate change legislation.

Quote of the day

You wouldn’t want to be inside the sausage factory that is the GDP calculation in Chad.

That's Chris Blattman on how fast African poverty is falling (or not) and the reliability of data on developing countries.

Weather as an instrument, etc.

Michael Roberts explains in a nutshell the econometrics of his fascinating and widely-referenced paper on temperature's worrying effect on corn yields. If you’ve ever wondered why more agricultural economists don’t use weather as an instrument or worry about the fundamental endogeneity of futures prices, this post is for you.