Three Essays on Saudi Arabia Agricultural Markets
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University of Kentucky UKnowledge Theses and Dissertations--Agricultural Economics Agricultural Economics 2019 THREE ESSAYS ON SAUDI ARABIA AGRICULTURAL MARKETS Yosef Abdulrahman Alamri University of Kentucky, [email protected] Author ORCID Identifier: https://orcid.org/0000-0001-5023-8998 Digital Object Identifier: https://doi.org/10.13023/etd.2019.295 Right click to open a feedback form in a new tab to let us know how this document benefits ou.y Recommended Citation Alamri, Yosef Abdulrahman, "THREE ESSAYS ON SAUDI ARABIA AGRICULTURAL MARKETS" (2019). Theses and Dissertations--Agricultural Economics. 79. https://uknowledge.uky.edu/agecon_etds/79 This Doctoral Dissertation is brought to you for free and open access by the Agricultural Economics at UKnowledge. It has been accepted for inclusion in Theses and Dissertations--Agricultural Economics by an authorized administrator of UKnowledge. For more information, please contact [email protected]. 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Yosef Abdulrahman Alamri, Student Dr. Michael Reed, Major Professor Dr. Tyler Mark, Director of Graduate Studies THREE ESSAYS ON SAUDI ARABIA AGRICULTURAL MARKETS ________________________________________ DISSERTATION ________________________________________ A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the College of Agriculture, Food and Environment at the University of Kentucky By Yosef Abdulrahman Alamri Lexington, Kentucky Director: Dr. Michael Robert Reed, Professor of Agricultural Economics Lexington, Kentucky 2019 Copyright © Yosef Abdulrahman Alamri 2019 https://orcid.org/0000-0001-5023-8998 ABSTRACT OF DISSERTATION THREE ESSAYS ON SAUDI ARABIA AGRICULTURAL MARKETS The first essay compares six common models, linear, quadratic, Cobb-Douglas, translog, logarithmic, and transcendental, to estimate wheat yield and area functions for Saudi Arabia. Data cover 1990-2016 for all the variables that affect wheat supply. After testing the models using Box-Cox, multicollinearity, and autocorrelation tests, we decide that the Cobb-Douglas models provide the best fit for both yield and area. We find the price elasticity of wheat is inelastic. Yield price elasticities are more inelastic than area elasticities. The impact of government policy number 335 has a larger effect on area than yield. The cultivated area of wheat, the one-year lag of yield, and the number of machines per hectare are the most influential factors affecting wheat yield. The primary factors influencing the area models are a one-year lag of both cultivated area and yield, as well as the number of machines per hectare. The second essay estimates the residual demand elasticity that rice exporters face in Saudi Arabia. The inverse residual demand methods, as proposed by Reed and Saghaian 2004, are used for rice exporters to Saudi Arabia during the period 1993-2014. Estimation results of the elasticities of the residual demand indicate that Australia, India, and Pakistan enjoy market power, while Egypt faces a perfectly elastic demand curve. We find Thailand and the US had positive inverse residual demand which means they also have no market power. The last essay is about the virtual water trade in Saudi Arabia. Using the concept of virtual water introduced by Allan 1994 and developed by Hoekstra and Hung (2002), we estimate virtual water trade for 20 crops of Saudi Arabia during 2000-2016. Our result shows the average virtual water trade was 12.5 billion m3/year. Saudi has net virtual water imports, with the most significant virtual water imports coming from cereals & alfalfa and vegetables; and there is net virtual water export of fruit. Saudi virtual water trade reduces pressure on water resources by 52%. Distance plays a role in Saudi virtual water export; we found that more than 90% of exports go to neighboring countries, including 45% to GCC countries. More than 30% of virtual water imports come from Europe. A Gravity model is used to investigate whether water scarcity variables influence trade. We compare the OLS, Fixed effects, Random effects, and PPML estimators to get the best model. The AIC, and tests for multicollinearity, and heteroskedasticity assist in determining estimation procedures and the final models. We cluster the errors by distance to improve the specific country effect variables such as economic mass variables. For the cereals and alfalfa group, we find that water-related variables influence virtual water imports of cereals, millet, sorghum, corn, barley, and sesame. Therefore, we suggest that a basic gravity model be applied to the other crops. In the vegetable group, we find that related water variables impact virtual water trade for all crops except marrow. Dates are the only fruit crop that are not influenced by the water-related variables. KEYWORDS: Cobb-Douglas, Partial Adjustment, Lerner Index, Inverse Residual Demand, Virtual Water Trade, PPML. Yosef Abdulrahman Alamri July 10th, 2019 THREE ESSAYS ON SAUDI ARABIA AGRICULTURAL MARKETS By Yosef Abdulrahman Alamri Dr. Michael Reed Director of Dissertation Dr. Tyler Mark Director of Graduate Studies July 10th, 2019 Date DEDICATION To my patient father: you have done much to help me overcome the difficulties I encountered and the complexities I faced. To my beloved mother: I will never forget how you stood with me and relieved a lot of my pain and grief. It is impossible to express how much I thank them for their patience as I lived far from them. Without my parents, this accomplishment would have no meaning. To my wife and the most beautiful flowers in my life, Sarah and Reem, and the greatest children, Mohammed and Omar. To all my brothers and beautiful sisters: I would like to thank you for your incredible support. If you have such people with you, know that you will never walk alone. ACKNOWLEDGMENTS This dissertation would not be possible without the support and assistance of several people. First, I owe in particular to Dr. Reed, my advisor, for the support, patient guidance, editorial assistance, and excellent cooperation, during my study at UKY. The researcher cannot but express his sincere thanks and appreciation to him for his help and guidance until the research came into being. Reed guided me to a pretty piece of information, "What I was" and "What I want to be." This information encouraged me to publish several papers during my study and not to wait for the future. Next, I extend my thanks and gratitude to Dr. Saghaian for his advice, help, and encouragement throughout the study period. The researcher finds no words to express their great appreciation and respect for their sincere effort, real support, and guidance throughout the study period. I would also like to thank and appreciation to Dr. Mark for his sincere efforts and guidance. Also, I would like to thank Dr. Kim for his guidance and Dr. Ferrier for participation to serve in my dissertation. The researcher would like to thank Dr. Dillon, who was following my studies from the first stages. His guidance had a significant impact on completing my doctorate in due time. In addition, I would like to thank the former students of Almojel. I have benefited a lot from my scientific discussion with him until I learned from him. Also, I would like to thank my helping classmate Mahla Zare and Saber Feizy. Moreover, Rita, Karen, and Janine who were helping me had a significant impact on myself. I also extend my thanks and appreciation to the members and employees of the Department of Agricultural Economics and College of Food Science and Agriculture in Saudi Arabia who stood with me, helped me, and support me. I cannot forget Dr. Al- Qunaibet, Alqahtani, Al Nashwan, Al-Rwis, and AlSultan who stood with me in time of distress and push me to obtain the degree of doctorate. Finally, I offer this humble work to Dr. Badran A. Alomar, the Rector of King Saud University, who gave me the support to complete my study. iii TABLE OF CONTENTS ACKNOWLEDGMENTS .............................................................................................................