Three Essays on the Economics of Local Food Systems, and Retail Market Dynamics.

Abstract

In the present collection of essays, we contribute to the growing literature of the economics of local food systems. In the first chapter, we develop a fully calibrated positive mathematical programming (PMP) model for Hawaii’s local food systems to facilitate policy debates regarding local food production. We use the model to assess two proposed policies – a general excise tax (GET) exemption on locally-produced foods, and a public investment in agricultural infrastructure (Whitmore Project). Our analysis suggests that Hawaii’s local food systems may benefit from either of the policies but the level of impact may vary significantly, subject to some caveats. In the second chapter, we incorporate noncommercial farming into the PMP model & simulate a recently proposed market-value assessment (MVA) based property tax policy by the County of Maui. Since noncommercial producers are significantly different from commercial farmers, in terms of farming objective, productivity, etc., it is important to understand how they may respond differently to any major agricultural policy change. Our simulations suggest that the proposed policy change will have moderate impacts on commercial farming, but large impacts on most crops under noncommercial farming. Finally, in the third chapter, we investigate the market dynamics of local and imported foods in Honolulu’s retail chains using Nielsen retail scanner data for four selected foods. The results from panel vector-autoregressive models and impulse response functions indicate the exogenous determination of the prices of imported foods. Moreover the imported foods sales seem to recover more quickly after a price shock than the local foods sales, perhaps because of consumers’ relatively higher dependence on the cheaper imported versions. In addition, local prices were found to be responsive to the variations in prices of their imported counterparts – suggesting competitive pressure.