Research on Agricultural Market's Field of Work
Excellence Initiative: Participation at the Courant Research Center in the Research Fields of:
Current Projects (according to the colleagues)
- Econometric modeling of vertical price transmission in the presence of multiple shifts in the underlying time series
(Prof. Dr. Bernhard Brümmer)
Vertical market integration in transition countries is often characterised by a large extent of instability. Fluctuations of prices, variations in yields, and policy uncertainty often render markets highly unstable. In particular, price relationships do not evolve smoothly over time. This entails difficulties for the quantification of vertical market integration. The standard methods, rooted in cointegration analysis, generally assume the absence of structural breaks. An alternative approach, which is better suited when the underlying time series are subject to multiple shifts, is the Markov-Switching vector autoregression model, which we adapt in the form of a vector error correction model (MSVECM). The vertical price transmission between wheat and wheat flour in Ukraine during 2000-2004 is studied, and the effects of policy changes on this transmission are analyzed. Since the price relations are presumably affected by the numerous policy changes during the observation period, we are able to identify different regimes, which correspond to different parameters for the short-run price adjustments and for the residual variances. These regimes allow explaining the vertical price transmission both in ‘clear-cut’ phases and ‘transition’ periods (e.g., in the course of shifts from export and import situation and vice versa). The approach, although already found useful in its present form, could be extended by aiming at the direct incorporation of policy variables. For example, a rigorous screening of newspapers and similar media could be used to construct an index of awareness for new developments on the corresponding markets. Such information could then be utilised in the econometric procedure to check whether a re-estimation of the MSVECM taking this prior information on the state variable into account gives a similar picture or not. - Imperfect Competition and Market Power on the Internationalen Markets for Dairy Products
(Markus Fahlbusch)
On the international markets for dairy products there is to state a tremendous concentration on the provider side. The New Zealand dairy cooperative Fonterra controls directly or indrectly over 50% of the trading volume. To analyse Price formation on the international markets for dairy products the market power of Fonterra and its influence on international markets need to be clarified; for this purpose there are no studies yet. It is essential to take account of the milk markets' characteristics. These include limited storability as well as interconnections of the provider and demand side due to by-products, substitutes and complements. Furthermore Fonterra's involvement in im- and exports of various countries is to take into consideration.
Because of data restrictions on the international markets for dairy products the price-to-market-approach and the residual-demand-approach are the two major approaches of price setting behaviors to be applied. The research objective is to adjust these approaches to the described characteristics of the dairy markets and Fonterra and to calculate empirically the appropriate models.
- Formulation of a user-friendly version of the European Simulation Models (ESIM)
(Oliver Balkhausen, Martin Banse, Harald Grethe, Nolte; the two last of these belong to Humboldt University of Berlin)
In dieser Arbeit wurde die gegenwärtig am Lehrstuhl genutzte Version des partiellen Handelsmodells ESIM von SuperCalc auf die Nutzung mit dem Software Paket GAMS übertragen. Dabei wurde das Modell neben der Aktualisierung der Datenbasis auch um weitere Produkte ergänzt sowie in der Modellierung von entkoppelten Direktzahlungen erweitert. - Gesamtwirtschaftliche Implikationen einer Anwendung der Gemeinsamen EU-Agrarpolitik in den Ländern Mitteleuropas – eine Analyse auf der Grundlage von Allgemeinen Gleichgewichtsmodellen
(Martin Banse)
In diesem Forschungsvorhaben werden die gesamtwirtschaftlichen Folgen der Übertragung der EU-Agrar- und Strukturpolitik in den beitretenden Ländern aus Mittel- und Osteuropa untersucht. Es werden für alle zehn beitretenden Länder allgemeine Gleichgewichtsmodelle erstellt, mit denen in Politikszenarien die Folgen der Übertragung der EU-Agrar- und Strukturpolitik in ihrer gegenwärtigen Form bzw. in reformierter Form analysiert werden. - Auswirkungen entkoppelter Direktzahlungen in der erweiterten Europäischen Union
(Oliver Balkhausen, Martin Banse)
Im Rahmen des von der EU-Kommission geförderten Forschungsprojekts „The Impact of Decoupling and Modulation in the Enlarged Union: a Sectoral and Farm Level Assessment“ werden gemeinsam mit acht weiteren Partnerinstituten die Folgen der Entkopplung von Direktzahlungen analysiert. Am Lehrstuhl werden zwei Kapitel (Workpackage 9 und 10) dieses Projektes bearbeitet, in denen die quantitative Untersuchung der Folgen entkoppelter Direktzahlungen mit Hilfe des partiellen Handelsmodells ESIM als auch mit allgemeinen Gleichgewichtsmodellen im Mittelpunkt steht. - Evaluierung der Getreide-Marktordnung der Europäischen Union
(Oliver Balkhausen, Martin Banse)
Im Rahmen eines von der EU-Kommission finanzierten Projekts wird die Getreidemarktordnung der EU in ausgewählten Mitgliedsländern und Regionen evaluiert. Für die Bundesrepublik werden dabei besonders für die Bundesländer Mecklenburg-Vorpommern und Niedersachsen die Wirkungen der Reformen der Getreidemarktordnung seit der MacSharry-Refom untersucht. - Policy Reform and Productivity Change in Chinese Agriculture: A Distance Function Approach
(Bernhard Brümmer)
Agricultural policy reform has been an important source of change in the Chinese agricultural sector. The reforms led to productivity growth and helped China in pursuing its self-sufficiency goal especially in the grain sector. To analyse whether observable productivity growth stems from technologically induced components, or from the market induced parts, a multi-input-multi-output model is derived using an econometric distance function framework. A decomposition allows to distinguish allocative effects, scale effects, technological change, and technical efficiency change. Data on farms in Zhejiang from 1986 to 1999 are used to analyse the impact of policy reform.
Another aspect of special interest to policy makers in China is the relationship between structural change, economies of scale, and economies of size. Using farm level data from Zhejiang province we analyse the development of the scale efficiency in a multi-output context. In particular, the impact of diversification strategies on productivity is analysed. - Spatial market integration: Econometric modeling of spatial dependence
(Bernhard Brümmer)
The Parity Bounds Model (PBM) along the lines of Spiller & Huang (1986), Sexton et al. (1991), Carter (1993), and Baulch (1995) provides a suitable framework for measuring market integration of spatially separated markets. The PBM is a switching regime regression model, which estimates the (stochastic) version of the Law of One Price, i.e., the extent to which arbitrage opportunities between two spatially separated markets are exploited. In particular, the market integration between each regional market and, e.g., the world market is measured in terms of the probability of violations of the Law of One Price. The advantages of the PBM make this approach for measuring market integration particularly suitable in the case of Ukrainian wheat markets. First, it entails less restrictive assumptions than traditional time series models for market integration: E.g., reversions in trade directions are admissible, and the role of transaction cost is explicitly recognized. Second, it is applicable in the case of relatively short time series; the lack of sufficiently long time series often limits the applicability of time series techniques for transition countries. Third, it produces clear and interpretable results: Arbitrage is a straightforward concept, and the share of violations of the LOP can be easily communicated to policy makers. However, important hints to the underlying causes of market integration (or lack thereof) might be hidden in possible spatial dependency patterns of the regime shares. A first step in the econometric modeling of spatial dependence can be based on Moran's I test, which might be viewed as the spatial pendant to the Durbin-Watson test for autocorrelation. The unsurprising result, that the null hypothesis of no spatial autocorrelation can be soundly rejected, requires an adaptation in the estimation procedure of the standard PBM. - Econometric modeling of vertical price transmission in the presence of multiple shifts in the underlying time series
(Bernhard Brümmer)
Vertical market integration in transition countries is often characterised by a large extent of instability. Fluctuations of prices, variations in yields, and policy uncertainty often render markets highly unstable. In particular, price relationships do not evolve smoothly over time. This entails difficulties for the quantification of vertical market integration. The standard methods, rooted in cointegration analysis, generally assume the absence of structural breaks. An alternative approach, which is better suited when the underlying time series are subject to multiple shifts, is the Markov-Switching vector autoregression model, which we adapt in the form of a vector error correction model (MSVECM). The vertical price transmission between wheat and wheat flour in Ukraine during 2000-2004 is studied, and the effects of policy changes on this transmission are analyzed. Since the price relations are presumably affected by the numerous policy changes during the observation period, we are able to identify different regimes, which correspond to different parameters for the short-run price adjustments and for the residual variances. These regimes allow explaining the vertical price transmission both in ‘clear-cut’ phases and ‘transition’ periods (e.g., in the course of shifts from export and import situation and vice versa). The approach, although already found useful in its present form, could be extended by aiming at the direct incorporation of policy variables. For example, based on a rigorous screening of newspapers and similar media could be used to construct an index of awareness for new developments on the corresponding markets. Such information could then be utilised in the econometric procedure to check whether a re-estimation of the MSVECM taking this prior information on the state variable into account gives a similar picture or not. - Scale efficiency in the presence of multiple outputs: A distance function approach
(Bernhard Brümmer)
Measures of scale efficiency in the parametric context have been proposed by Ray (1998) and Balk (2001). For a multi-output technology, Balk develops a scale efficiency measure which is similar to the familiar DEA approach to scale efficiency estimation. Here, we proceed with an econometric estimation of the underlying output distance function. The scale efficiency and scale efficiency changes for a sample of Chinese farms from Zhejiang province is analysed. The observation period is from 1995 to 2000, hence the farms are observed over a time frame where various important changes in policy with implications for structural change occurred. The distribution of scale efficiency over the single observation years signals several policy-induced impediments to growth. - Die Reform der Gemeinsamen Zuckermarktordnung der EU
(Bernhard Brümmer, Stephan v. Cramon-Taubadel)
Die EU-Kommission hat einen Vorschlag zur Reform der Gemeinsamen Marktordnung für Zucker vorgelegt, um auch bei diesem Relikt aus der Gemeinsamen Agrarpolitik alter Prägung „stärkere Ausrichtung am Markt, mehr Verbraucherorientierung und bessere Handelsbedingungen“ (Europäische Kommission, 2004) zu erreichen. Der Reformvorschlag der Kommission stellt in der Tat eine Abkehr von den bisherigen Regeln für den Zuckermarkt dar: Erstmals seit Einführung der Zuckermarktordnung (ZMO) im Jahre 1968 ist eine nominale Preissenkung vorgesehen, es sollen die Produktionsquoten gekürzt werden, und auch der Handel mit Rübenlieferrechten innerhalb Europas wird vorgeschlagen. Weiter sind im Reformvorschlag als Ausgleich umfangreiche Direktzahlungen auf Erzeugerebene sowie Umstrukturierungshilfen für Zuckerrübenfabriken vorgeschlagen. Dieser Reformvorschlag hat – teils heftige – Reaktionen bei verschiedenen Gruppen hervorgerufen.
Es wird untersucht, welche wahrscheinlichen Folgen mit einer Umsetzung der Vorschläge der EU-Kommission vom Juli 2004 einher gingen. Dazu werden die Wirkungen dieser Reform auf die Betroffenen sowohl innerhalb als auch außerhalb der Europäischen Union untersucht. Bei der Wirkungsanalyse wird ein wohlfahrtsökonomisch fundierter Ansatz verfolgt, anhand dessen die Auswirkungen auf Produzenten (Zuckerrübenanbauer sowie -verarbeiter), Konsumenten (industrielle Zuckerverwender sowie Endverbraucher) und Steuerzahler (Budget der EU und der Mitgliedstaaten) untersucht werden. Auf der internationalen Ebene werden ausgewählte Aspekte in Bezug auf die Entwicklungsländer, differenziert nach dem Ausmaß ihres präferenziellen Zugangs zum EU-Zuckermarkt, in den Mittelpunkt der Ausführungen gestellt. - Payments Decoupling and the Intra-European Calf Trade
(Sören Prehn)
With the 2003 CAP Reform, the policy instrument of decoupling was implemented. Unfortunately for the implementation, the EU had to concede far-reaching rights to Member States. Thus, there is the coexistence of different implementation schemes in the EU, today. Especially for the beef sector, where not even fully decoupling was obligatory, the common market principle is in question. Here, we are going to derive from the profit maximization approach an intermediate product gravity trade model in the spirit of Helpman et al. (2008). The structural parameter estimates will be used to show the negative welfare implications of the renunciation from the common market principle. Our results indicate that, when a Member State sticks to coupled payments, welfare decreases, when other Member States already have decoupled. - Economic Efficiency and Land Rights –A stochastic frontier analysis of agricultural production in China
(Yanjie Zhang)
The rural reform started in the late 1970s improved farmers’ incentives and had great impacts on China’s agricultural production and productivity growth. Many empirical studies show, while productivity improvement and technological progress have been spectacular over the last two decades, the performance of efficiency change is not so inspiring, and there seems to be lack of greater institutional incentives to arouse farmers’ enthusiasm for agricultural production when entering the 1990s. Meanwhile, the remaining ambiguity over land tenure rights seems to show a robust explanation power for the source of unexpected efficiency performance. Considering the currently hot dispute about institutional reform related to land issues in China, the question whether it is the suitable choice and right timing for the creation of new institutions will be an interesting topic to explore.
Completed Projects