Article

Can Local Farms Survive Globalization?

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Abstract

Due to expanding trade and increasing concentration of production during the past few decades, small local farms have faced ever-growing competitive pressures. We investigate the impacts of this globalization on production of local food by examining Hawaiʻi’s open island economy and econometrically evaluating impacts of import competition on the growth and survival of individual fruit and vegetable farms. We find evidence that rising levels of imports significantly hinder farm growth in Hawaiʻi and have a smaller impact on farm survival. Increased foreign competition increases the likelihood of exit for commercial farms but has little effect on small noncommercial farms. competition increases the likelihood of exit for commercial farms but has little effect on small noncommercial farms.

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... Hawaii's high dependence on imported food was found to be due to several reasons, including local farms' much higher factor costs compared to their competitors (Parcon et al., 2011), their relatively smaller size (Naomasa et al., 2013), along with on average 15-20% less efficiency than the U.S. mainland farms in terms of input-output ratios (Arita et al., 2012). While many weaknesses embedded in farm structure force Hawaii to be increasingly dependent on outside sources for its foods, this dependence also hinders farm growth significantly (Arita et al., 2014). ...
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... Foods produced by local farms have the natural advantage of being fresher and more lavorful and are considered more trusted dietary sources. Second, globalization has led to a severe decline in small-scale local farms and increased concentration of agricultural production that is dominated by large companies (Arita, Hemachandra, and Leung 2014). "Buying local" is a signiiicant part of efforts to support regional economies and employment, especially during tough economic times, and to rebalance power in the food supply system (Halliday 2011). ...
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Small farms are seriously challenged today in ways that make their future precarious. Marketing chains are changing and becoming more integrated and more demanding of quality and food safety. This is creating new opportunities for farmers who can compete and link to these markets, but threatens to leave many others behind. In developing countries, small farmers also face unfair competition from rich country farmers in many of their export and domestic markets. The viability of many is further undermined by the continuing shrinkage of their average farm size. And the spread of HIV/AIDS is further eroding the number of productive farm family workers, and leaving many children as orphans with limited knowledge about how to farm. Left to themselves, these forces will curtail opportunities for small farms, overly favor large farms, and lead to a premature and rapid exit of many small farms, adding to already serious problems of rural poverty and urban ghettos. If small farmers are to have a viable future, then there is a need for a concerted effort by governments, NGOs, and the private sector to create a more enabling economic environment for their development. Appropriate interventions could unleash significant benefits in the form of pro-poor agricultural growth in many developing countries and more than pay for themselves in terms of their economic and social return. But they do not seem very likely at the moment and current trends are moving in the opposite direction. Copyright 2005 International Association of Agricultural Economics.
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This paper develops a dynamic industry model with heterogeneous firms to analyze the intra-industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter-firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity. Copyright The Econometric Society 2003.
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We develop an endogenous growth model with R&D spillovers to study the long-run consequences of offshoring with firm heterogeneity and incomplete contracts. In so doing, we model offshoring as the geographical fragmentation of a firm's production chain between a home upstream division and a foreign downstream division. While there is always a positive correlation between upstream bargaining weight and offshoring activities, there is an inverted U-shaped relationship between these and growth. Whether offshoring with incomplete contracts also increases consumption depends on firm heterogeneity. As for welfare, whereas with complete contracts an R&D subsidy is enough to solve the inefficiency due to R&D spillovers, with incomplete contracts a production subsidy is also needed. Copyright © The editors of the "Scandinavian Journal of Economics" 2009 .
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