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This paper examines how uncertainty analysis can be used to examine parameter uncertainty; determine the expected value of model outcomes and the range of possible model outcomes for a non-linear integrated economic and biophysical model.

Many firms anticipate that a cap on greenhouse gas emissions will eventually be imposed, either through an international agreement like the Kyoto protocol or through domestic policy, and have started to take voluntary actions to reduce their emissions. If agricultural producers participate in the emerging market for tradable C-credits, it must be possible to verify that actions farmers take do increase the amount of C in soils and this increase can be maintained over the length of the contract. In this paper we develop a prototype measurement and monitoring scheme for C-credits sequestered in agricultural soils and estimate its costs for the small grain-producing region of Montana using an econometric-process simulation model. Three key results emerge from the prototype framework. First, the efficiency of measurement and monitoring procedures for agricultural soil C sequestration depends on the price of C credits. Second, we find that at all price levels, costs of measuring and monitoring are largest in areas that exhibit the greatest heterogeneity in carbon values. Third, in a case study application of our prototype measurement and monitoring scheme, we find that if we assume similar error and confidence levels as forestry contracts, the upper estimate of measurement and monitoring costs associated with a contract that pays farmers per tonne of C sequestered is 3% of the value of a C-credit. This cost is small relative to the estimated net value of the contract. Thus we conclude that measurement and monitoring costs are not likely to be large enough to prevent producers from participating in a market for tradable credits.

The information presented in this report represents data collected from farming and ranching operations in the southern two tiers of counties in Nebraska. This study was based on a random sample of 151 southern Nebraska farms that have annually-planted crop acreage. Information was obtained for the 1997 crop year. This data set is referred to as the MSU/UNL survey data. From the MSU/UNL survey data, the average size of the farming operations in the survey, in 1997, was 1,316 acres. Of these, 856 acres were planted to annual crops, and the remaining 460 acres included 61 acres in fallow, 29 acres in hay, 287 acres in range and pasture, 28 acres in CRP, and 55 acres in other uses. Operation size was largest in the west, due mostly to a large number of range and pasture land acres per operator. Average farm size decreased in the east as range and pasture land acres and acres fallowed per farm both decreased. Acreage planted to annual crops was similar from east to west. Irrigated and dryland grain corn was the predominant crop grown in the survey area. Other major crops included soybeans, sorghum, and winter wheat. An estimated 44 percent of the respondents' cropland acreage was dedicated to corn production. Other annual crops included soybean (21 percent of cropland acreage), sorghum (10 percent of cropland acreage), winter wheat (12 percent of cropland acreage), and minor crops (4 percent of cropland acreage) with most of the remaining cropland in fallow. The distribution of these crops varied across the southern tier of Nebraska counties. Winter wheat was most common in the west and soybean was more prevalent in the east. About 65 percent of total cropland acreage reported was dryland while the remaining 35 percent was irrigated. Significantly more irrigation takes place in the central area. Two-thirds of the operations surveyed reported some type of livestock enterprise. Cattle were the most common type of livestock reported, followed by hogs and sheep. Breeding cattle numbers were greater than feeder cattle numbers. Dairy cattle were rarely reported except in the eastern counties. Producers in the central and eastern counties also reported hog production, with feeder hogs greatly outnumbering breeding animals. Comparisons of acres planted and crop yields from the MSU/UNL survey data to data collected by Nebraska Agricultural Statistics Service (NASS), for the same year, show little differences. Most estimates are within 2 percentage points of each other.

Under the Kyoto protocol of the United Nations Framework Convention on Climate Change the United States is charged with reducing emissions of greenhouse gases to seven percent below their 1990 levels by the period 2008-2012. These reductions could be met from many industries including agriculture. In this paper, an economic simulation model is linked to an ecosystem model to quantify the economic efficiency of policies that might be used to sequester carbon (C) in agricultural soils in the Northern Plains region. Simulations with the Century ecosystem model show that long-term soil C levels associated with a crop/fallow system are less than those for grass alone, but that soil C levels for grass-clover-pasture are greater than for continuously cropped grains. The analysis shows that a CRP-style policy is found to be an inefficient means to increase soil C because the per acre payments to convert crop-land to grass-only draw land from both the crop/fallow system and the continuous cropping system, and costs typically exceed $100 per MT (metric ton) of C. In contrast, payments to adopt continuous cropping were found to produce increases in soil C for between $5 to $70 depending on area and degree of targeting of the payments. The most efficient, lowest cost policy is achieved when payments are targeted to land that was previously in a crop/fallow rotation. In this range, soil C sequestration appears to be competitive with C sequestered from other sources.

Under the Kyoto protocol of the United Nations Framework Convention on Climate Change the United States is charged with reducing emissions of greenhouse gases to seven percent below their 1990 levels by the period 2008-2012. These reductions could be met from many industries including agriculture. In this paper, an economic simulation model is linked to the CENTURY ecosystem model to quantify the economic efficiency of policies that might be used to sequester carbon (C) in agricultural soils in the Northern Great Plains region. Model outputs are combined to assess the costs of inducing changes in equilibrium levels of soil C through three types of policies. The first is a CRP-style policy that provides producers with per-acre payments for converting crop-land to permanent grass; the second is a policy that provides per-acre payments to all farmers that use continuous cropping, regardless of the land's cropping history; the third is a policy that provides per-acre payments for the use of continuous cropping only on land units that had previously been in a crop/fallow rotation. The analysis shows that a CRP-style policy is found to be an inefficient means to increase soil C resulting in costs that typically exceed $100 per MT (metric ton) of C. In contrast, payments to adopt continuous cropping were found to produce increases in soil C for between $5 to $70/MT depending on the geographic area and degree of targeting of the payments. The most efficient, lowest cost policy is achieved when payments are targeted to land that was previously in a crop/fallow rotation. In this range, soil C sequestration appears to be competitive with C sequestered from other sources.

This paper develops the conceptual and empirical basis for a class of empirical economic production models that can be linked to site-specific bio-physical models for use in integrated assessment research. Site-specific data are used to estimate econometric production models, and these data and models are then incorporated into a simulation model that represents the decision making process of the farmer as a sequence of discrete or continuous land use and input use decisions. This discrete/continuous structure of the econometric process model is able to simulate decision making both within and outside the range of observed data in a way that is consistent with economic theory and with site-specific bio-physical constraints and processes. An econometric-process model of the dryland grain production system of the Northern Plains demonstrates the capabilities of this type of model.

This paper develops a conceptual framework that can provide a scientific foundation for formulating policies that consider environmental and economic tradeoffs. It addresses a critical problem recognized in the environmental sciences, namely, choosing the appropriate spatial scale for measurement and analysis of spatially variable economic and biophysical processes.

Changes in health care policies, demographics, and technology have presented new opportunities for the delivery of medical care services and information to rural communities. Telemedicinethe use of electronic information and communications technologies to provide and support health care when distance separates the participantshas significantly impacted the delivery of rural health care services. This paper presents an overview of the telemedicine technologies, government involvement in support of telemedicine, and issues that need to be addressed in designing an economic framework to evaluate the net benefits of telemedicine to rural communities and consumers. Federal and state governments have invested millions of support dollars in the form of equipment, infrastructure, and incentives for consumers and providers to expand the use of telecommunications in medical care. Since disbursement of these funds is already underway, it only makes sense to develop a method to determine both where and whether an additional dollar of funding for telemedicine development would be of the greatest benefit to society. If telemedicine can prove itself as a useful method for improving the likelihood of survival of rural hospitals, then, in the interest of rural development, it may be a technology worth investing in; i.e., the social benefits, measured as the sum of the private and public benefits, may outweigh the costs. According to its supporters, telemedicine systems have the potential to simultaneously address several problems characteristic of health care in rural areas, including access to care, cost containment, and quality assurance. Access can be improved by linking providers in remote areas with specialists in metropolitan centers or peers in rural areas. Telemedicine not only enables a wider range of services to be offered in the local community but may have the added effect of improving physician retention in isolated areas, one of the primary challenges in maintaining access for frontier medical centers. Telemedicine can promote cost containment through the substitution of lower-cost rural providers and facilities. Ideally, improved quality will be achieved by the ready availability of consultations and referrals. These are the potential benefits of telemedicine implementation, but they have not yet been verified by research in a field setting. An evaluation framework for telemedicine needs to be capable of modeling changes in the behavior of health care consumers (i.e., altered visitation patterns), recognizing differences in quality of service, and finally, quantifying the value of these changes. This is no small task, and obtaining the required data will likely require the cooperation of many parties, including health care providers, patients, hospital and program administrators, and policymakers. These are the same groups that could benefit greatly from a better understanding of how telemedicine technologies affect health care delivery, but a meaningful framework for analysis needs to capture the many aspects of telemedicine implementation.

This study examined possible economic impacts on Northern Plains grain producers of policies that could be undertaken by the United States to comply with the Kyoto Protocol. The paper begins with a discussion of the potential effects of the Kyoto Protocol on prices of energy and inputs used in agricultural production. The next section describes the data and econometric models that were used to develop a field-scale, stochastic simulation model of the crop production system typical of the Northern Plains. This model is based on econometric production models estimated with a spatially referenced, statistically representative sample of farmers in Montana. The simulation analysis shows that the impacts of higher energy prices would tend to discourage the use of fallow, raise variable costs of production by 3 to 13%, and reduce net returns above variable cost by 6 to 18% in the case of spring wheat grown on fallow, Under the higher cost scenarios assumed in an analysis conducted by the Farm Bureau, production costs for spring wheat on fallow would increase by 15 to 27% and net returns would decline by 15 to 24%.

Changes in health care policies, demographics, and technology have presented new opportunities for the delivery of medical care services and information to rural communities. Telemedicine-the use of electronic information and communications technologies to provide and support health care when distances separates the participants-is one technology that has impacted the efficiency of delivery of rural health care services. This paper presents an overview of the telemedicine technologies, government involvement in support of telemedicine, evaluation efforts to date for these technologies, and issues that need to be addressed in designing an economic-based framework to evaluate the net benefits of telemedicine technologies to rural communities and consumers. An evaluation framework needs to be capable of quantifying the tradeoffs among access to health care services, the costs of delivery of a given level of services, and changes in the quality of the service that is being delivered via electronic communications; and how these tradeoffs shift as the level of telemedicine and the technology changes. The framework that is proposed is based on models of consumer behavior that incorporate discrete choices among quality differentiated sites.

This research provides one of the first empirical estimates of a data-based dynamic factor demand model for American and Canadian agriculture. Models such as these deserve more widespread use in the empirical analysis of agriculture. These models have the advantage that they do not impose inappropriate dynamics on the data. Rather they permit the data to select the appropriate dynamics. We use a model originally developed by Anderson and Blundell. This model is a general first-order dynamic model which contains as testable hypothesis several simpler models. This model permits us to estimate the long-run agricultural production structure as a subset of the dynamic parameter estimates. We will test this long-run structure for symmetry, homotheticity and neutral technical change. The estimated models may be used to test for three alternative dynamic structures. In the limit, dynamics may not be needed and we can test for the static long-run equilibrium model. Two intermediate cases are the autoregressive and the partial adjustment models which are simpler than the general model but still include dynamics. Our results suggest that the long-run equilibrium model is unsatisfactory in both countries. A dynamic model is needed. In both countries, the two more restricted dynamic models are rejected. The general dynamic model is required. In Canada, the long-run equilibrium structure is homothetic with neutral technical change. In the United States, homotheticity is also accepted but neutral technical change is rejected.

The paper presents a review of the methodological state-of-the-art in interspatial and intertemporal productivity measurement. An overview of productivity and efficiency concepts precedes a technical discussion of the two approaches currently existing in evaluating bilateral and multilateral productivity. The accounting or nonparametric approach, which relies on index number methods, provides measures of relative efficiency based on prices and quantities of outputs and inputs. The selection of a particular index number formula for multilateral comparisons of productivity growth should satisfy a priori axioms. In contrast, if sufficient data are available, the parametric or statistical approach can be used to estimate the production technology and to obtain more diverse comparisons than those from accounting procedures. Both approaches depend on developing comparable data sets, while data requirements are dictated by the amount of disaggregation desired.

A method of decomposing the growth in total factor productivity into effects due to nonconstant returns to scale and technical change was applied to the U.S. agricultural sector. The scale effects and technical changes were measured using an economically estimated two-output, three-input translog cost model. Total factor productivity as conventionally measured grew at an average annual rate of 1.56% from 1950-82. This growth rate, however, misrepresented the rate of technical change in U.S. agriculture primarily due to the nonconstant scales effects.

A method of decomposing the growth in TFP as conventionally measured (nonparametrically) into effects due to departures from competitive pricing rules, nonconstant returns to scale, and technical change has been applied to the U.S. agricultural sector. The empirical results for decomposing the growth rate are based upon a two-output, three-input translog cost model. Total factor productivity as conventionally measured grew at an average annual rate of 1.56 percent from 1950-1982. This growth rate, however, misrepresented the rate of technical change in U.S. agriculture, primarily due to scale effects. The nonmarginal cost pricing component does not appear to be a source of distortion in TFP growth. Parametrically measured TFP growth (TFP*) is, in general, lower than the conventionally measured index of TFP reflecting the decreasing returns to scale characterization of U.S. agriculture up through the late 1970s. Interpretation of these results should be done with due recognition of the econometric difficulties encountered in separating scale and technical change components.