Measuring positive externalities in Japanese rice production: A hedonic price analysis

Ongoing agricultural negotiations in the multilateral trade regime discuss the linkages between agricultural subsidies and the sector's role in providing non-economic functions to the society. Proponents of this multifunctionality of agriculture argue that such functions will be at a social optimum when governments provide support to encourage production. Opponents consider such an argument as disguised protectionism. Some argue that the most efficient policies can only be employed after the exact nature of the linkage between the market and the non-economic benefits has been adequately analyzed.;This thesis examines one of the linkages between the rice market and the positive environmental externalities of organic and low input agriculture in Japan. The study conducted a hedonic price analysis using 281 observations of the rice price and quality characteristics collected in August 2002. The estimated hedonic price function has a semilogarithmic form with statistically robust estimators. It was found that positive externalities in rice production contributed to the rice price in a non-linear manner.;The econometric analysis shows that Japanese consumers pay a 44% price premium for domestically produced and certified organic rice. The results attest that concerns for non-economic benefits in rice production exist, that consumers actually pay for a part of the benefits through existing market mechanisms, and that consumers, supported by eco-label information, value and pay for the nonproduct related process and production methods.;The study proposes, as policy recommendations, that organic rice have a different tariff line from conventionally grown rice; that certain rice varieties of economic interest be protected through the intellectual property regime; that certain trade rules need to be revisited to reflect the reality of market forces; and that a comprehensive review of the impacts of the liberalization of the rice market be undertaken through applying the methods developed in the current study.