Research Briefs from the ISU Department of Economics

AgDM Newsletter
June 2012

CARD study shows impact of ethanol on pump prices

Du, Xiaodong; Hayes, Dermot, May 2012

We update the findings of the impact of ethanol production on U.S. and regional gasoline markets as reported previously in Du and Hayes (2009 and 2011), by extending the data to December 2011. The results indicate that over the period of Janu­ary 2000 to December 2011, the growth in ethanol production reduced wholesale gasoline prices by $0.29 per gallon on average across all regions. The Midwest region experienced the biggest negative impact of $0.45/gallon, while the East Coast, West Coast and Gulf Coast experienced negative im­pacts of similar magnitudes around $0.20/gallon. Based on the data of 2011 only, the marginal im­pacts on gasoline prices are found to be substan­tially higher given the increasing ethanol produc­tion and higher crude oil prices. The average effect across all regions increases to $1.09/gallon and the regional impact ranges from $0.73/gallon in the Gulf Coast to $1.69/gallon in the Midwest.

Full text is available at:


Revisiting Wal-Mart’s impact on Iowa small town retail: Twenty-five years later

Stone, Kenneth E.; Artz, Georgeanne M.
WP #12011, May 2012

Stone conducted the first economic impact study in Iowa of Wal-Mart stores in 1988. Since then, re­search on Wal-Mart’s impacts has exploded. Recent studies employ sophisticated statistical techniques to more accurately measure the size and direc­tion of effects. Many reach conclusions similar to Stone’s original work. This paper updates the origi­nal Stone study with additional years of data. It draws on recent methodological advances to help account for Wal-Mart’s strategic location decisions on estimated retail sales impacts in Iowa. Consis­tent with previous studies, we find that Wal-Mart’s entry into smaller trade centers in Iowa had a big initial impact on host town retail sales, with some categories experiencing large significant increases while others saw declines in sales per capita. Wal­Mart’s presence helped to stabilize or even expand the local retail sector of most rural Iowa host com­munities. To conclude, policy implications for lo­cal economic development officials are discussed.

Full text is available at:


Value of soil erosion to the land owner

Duffy, Michael
WP #12004, March 2012

Levels of soil erosion have decreased in the United States and Iowa, but soil erosion still remains a serious problem, especially for some soils. In 1982 there was an estimated 7.4 tons per acre of soil erosion on Iowa cropland. By 2007 erosion in Iowa had decreased to 5.1 tons per acre. For the entire United States, erosion rates dropped from 4.0 tons to 2.7 tons per cropland acre over the same time period. (USDA/NRCS, 2)

Erosion represents costs to farmers. These costs include lost fertilizer and soil carbon. Erosion also produces costs to society. These costs include clogged roadway ditches; increased turbidity in the water, damaging fish and increasing the need for filtration; and displaced soil in the water that in­creases siltation of water control structures. These societal costs are borne by taxpayers or society in general. They are ‘external’ to the decisions made by the farmer.

There is a third category of costs not usually con­sidered in a soil erosion discussion. These are the costs to land owners caused by a decrease in their asset value. Land owners may be the farmer, but increasingly they are not. In 2007 more than half the farmland in Iowa was rented, compared to 38 percent of U.S. farmland.

This paper estimates the costs of erosion to the land owner. The focus is on Iowa soils. Full text available at:


New retail reports by Eathington find sales stabilizing after economic downturn

New retail reports by Liesl Eathington, assistant scientist in Iowa State’s Department of Economics and the director of Iowa Community Indicators Program (ICIP), has found that retail sales in most Iowa regions appear to have stabilized over the past fiscal year following a substantial downturn during the recession. Iowa State’s annual retail trade analysis is based on state-reported sales of goods and services subject to Iowa’s statewide sales tax. Eathington found a slight growth in Iowa retail sales over the last fi scal year. Read the full article written by Mike Ferlazzo, ISU News Service, at: