Research

Job Market Paper

Technological Diffusion and Bundled Contracts: Soy Boom in Brazil

Abstract: Bundled contracts are a promising mechanism for the diffusion of capital-intensive technologies in developing regions. The introduction of a new type of farmer–trader contract, which bundles soy price guarantees, credit, technical assistance, and a technological package, has enabled rapid economic growth in Brazil’s soy industry. This paper investigates the role of this bundled contract on the diffusion of soy technologies and the resulting effect on the productivity of the agricultural sector in Brazil. To guide my empirical analysis, I model farmers’ technological and contracting choices, focusing on the benefits of bundling in removing multiple barriers to the adoption of capital-intensive technologies in low-income regions such as the Brazilian Savanna. To model farmers’ contracting and technological choices, I combine farm-level data for 1.5 million commercial farms from the 1996 and 2006 Brazilian agricultural census surveys, capturing the fastest period of soy expansion in Brazil. I present empirical evidence that contracting accelerates the diffusion of soy technology and increases the supply elasticity of soy in Brazil. I estimate that the introduction of bundled contracts explains 84% of total soy expansion in the agricultural frontier of the Brazilian Savanna.


Working Papers

The Opportunity Cost of Forestland in Brazil. An Assessment of the New Brazilian Forestry Code

Abstract: I assess a new trading instrument introduced in the revised Brazilian Forestry Code, the most important policy in Brazil for land-use regulation within private properties. The Brazilian Forestry Code regulates land diversion requirements to protect natural vegetation. The Code introduced a tradable environmental reserve quota (CRA), allowing farmers to comply with land diversion requirements by buying quotas for surplus natural vegetation from other properties. I built a farm-level dataset, using detailed agricultural census data for over 1.5 million farmers in Brazil, which mirrors the new national registry of rural properties used in the Code and simulated its implementation with the new tradable quotas. I estimated that the marginal cost of compliance with the CRAs declined by one-third in the Atlantic Forest biome and by half in the Savanna. These results demonstrate the potential of tradable quotas for environmental conservation.

Quantile Ricardian. Heterogeneous Impact of Climate Change in Brazil using Farm-level Data

In partnership with the Brazilian Agricultural Research Corporation (Embrapa)

Abstract: I use farm-level data for over 5 million farmers to investigate how Brazilian farmers adapt to climate change. I find that the Brazilian agricultural sector is resilient to temperature increases of up to 2 degrees Celsius, but that economic losses from warming increase sharply as temperature changes exceed 2 degrees Celsius. Additionally, I estimated marginal effects of warming on farm profitability at different quantiles of farmer productivity. The marginal effect of warming on farmer profitability varied from a 20% loss to a 15% gain for the least productive farmers, and from 11% loss to 5% gain for the most productive farmers. I find that farmers at the bottom of the productivity distribution have lower adaptation capability and their climate sensitivity is highly dependent on their current climate. The climate adaptation project with Embrapa was the first in Brazil using census data and demonstrated the potential of exploiting farm-level data to assess farmer adaptation choices.

Historical Cost Reductions in Brazilian Ethanol Production

Abstract: Ethanol production in Brazil has increased exponentially in the last four decades. The expansion of the Brazilian ethanol program depends on continuous reductions in production costs as ethanol competes directly with gasoline and recent increases in ethanol production costs have raised questions about the ability of this industry to fulfill its potential without additional government subsidies. The objective of this analysis is to quantify and explain the historical cost reductions in sugarcane ethanol production in Brazil since 1975.  An important contribution of this analysis is to incorporate a disaggregated historical cost data time series for the state of Sao Paulo reducing data uncertainty. I find that the previous literature on ethanol learning curves overestimated the historical cost reductions of the Brazilian ethanol. I estimate that sugarcane ethanol production costs in Brazil decreased by approximately 51% during the 36-year period from 1975 to 2011. The compounded annual reduction was 2.2% and most of the cost declines happened in the first 13 years following the National Alcohol Program (Pro-Alcohol). The key drivers of ethanol cost variation are factor prices, agricultural yields, and industrial scaling.  Improvements in agricultural yields are the key determinant of cost improvements and significant cost-reducing technological change preceded the start of the Pro-Alcohol program in 1975.  


Publications

DePaula, G. and R. Mendelsohn (2010): “Development and the Impact of Climate Change on Energy Demand: Evidence from Brazil". Climate Change Economics, vol. 1, No. 3 187-208



Work in Progress


A Structural Model of Farmer Adaptation to Climate Change in Brazil

In partnership with the Brazilian Agricultural Research Corporation (Embrapa)