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Economic hysteresis in hog production

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  • Jan Hinrichs
  • Oliver Musshoff
  • Martin Odening

Abstract

German hog production only responds in a very limited way to price fluctuations in the pork market. The hog production concentrates on a few regions though it is not bound to special natural conditions such as soil quality. Furthermore, the volume of production does not vary over time. Relatively high market risks, sunk costs and the flexibility of the decision maker to defer investments characterize decision problems in hog production. Thus the real option approach is chosen to explain the inertia in production capacity. By the use of panel data of specialized hog farms from the German Farm Accountancy Data Network, an empirical investment model is estimated. Formally, the model has the structure of a generalized ordered probit model. This approach allows to test for economic hysteresis in the adjustment of hog production capacity. The results confirm that uncertainty and flexibility widen the optimal range of inaction.

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  • Jan Hinrichs & Oliver Musshoff & Martin Odening, 2008. "Economic hysteresis in hog production," Applied Economics, Taylor & Francis Journals, vol. 40(3), pages 333-340.
    • Handle: RePEc:taf:applec:v:40:y:2008:i:3:p:333-340
    DOI: 10.1080/00036840500447880
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    Cited by:

    1. Giuliano Curatola & Michael Donadelli & Patrick Gruning & Christoph Meinerding, 2016. "Investment-Specific Shocks, Business Cycles, and Asset Prices," Bank of Lithuania Working Paper Series 36, Bank of Lithuania.
    2. Dillen, Koen & Tollens, Eric & Wesseler, Justus, 2010. "The Barroso Proposal Of Nationalizing Gmapproval: A Look At Ht Sugar Beets Under Changed European Sugar Policy," 14th ICABR Conference, June 16-18, 2010, Ravello, Italy 188086, International Consortium on Applied Bioeconomy Research (ICABR).
    3. Ihli, Hanna Julia & Maart, Syster Christin & Musshoff, Oliver, 2012. "Investment and Disinvestment in Irrigation Technology – An Experimental Analysis of Farmers’ Decision Behavior –," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124532, Agricultural and Applied Economics Association.
    4. Thiermann, Insa & Schroeer, Daniel & Latacz-Lohmann, Uwe, 2022. "Are German farmers ready for ‘warm restructuring’ of the pig sector?," 96th Annual Conference, April 4-6, 2022, K U Leuven, Belgium 321201, Agricultural Economics Society - AES.
    5. Thiermann, Insa & Breustedt, Gunnar & Rosenau, Carolin, 2019. "Einfluss der Größe auf die Aufgabe der Tierproduktion – empirische Analyse Milchvieh und Sauen haltender Betriebe in Deutschland," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 68(3), September.
    6. Breustedt, Gunnar & Mees, Martin, 2010. "Growth Of German Dairy Farms Under The Eu Milk Quota," 50th Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93950, German Association of Agricultural Economists (GEWISOLA).
    7. Niemi, Jarkko K. & Liu, Xing & Pietola, Kyosti, 2011. "Price volatility and return on pig fattening under different price- quantity contract regimes," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114614, European Association of Agricultural Economists.
    8. Sangcheol Song, 2014. "Entry mode irreversibility, host market uncertainty, and foreign subsidiary exits," Asia Pacific Journal of Management, Springer, vol. 31(2), pages 455-471, June.
    9. Maart, Syster Christin & Musshoff, Oliver & Odening, Martin & Schade, Christian, 2010. "Zum Desinvestitionsverhalten Landwirtschaftlicher Unternehmer: Ergebnisse Einer Experimentellen Untersuchung," 50th Annual Conference, Braunschweig, Germany, September 29-October 1, 2010 93943, German Association of Agricultural Economists (GEWISOLA).
    10. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "The comparison of investment behaviors of Kazakhstani and German farmers: An experimental approach," 86th Annual Conference, April 16-18, 2012, Warwick University, Coventry, UK 134770, Agricultural Economics Society.
    11. Lee, Sangjun & Zhao, Jinhua & Thornsbury, Suzanne, 2013. "Extreme Events and Land Use Decisions under Climate Change in Tart Cherry Industry in Michigan," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150568, Agricultural and Applied Economics Association.
    12. Sandri, Serena & Schade, Christian & Mußhoff, Oliver & Odening, Martin, 2010. "Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 30-44, October.
    13. Spiegel, Alisa & Severini, Simone & Britz, Wolfgang & Coletta, Attilio, 2020. "Step-by-step development of a model simulating returns on farm from investments: the example of hazelnut plantation in Italy: The example of hazelnut plantation in Italy," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 9(1), April.
    14. Nataliya Zinych & Martin Odening, 2009. "Capital market imperfections in economic transition: empirical evidence from Ukrainian agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 40(6), pages 677-689, November.
    15. Kramer, Benedikt & Schorr, Anke & Doluschitz, Reiner & Lips, Markus, 2018. "Wahrscheinlichkeit Von Investitionen In Milchviehställe Schweizer Verkehrsmilchbetriebe," 58th Annual Conference, Kiel, Germany, September 12-14, 2018 275845, German Association of Agricultural Economists (GEWISOLA).
    16. Tubetov, Dulat & Maart, Syster Christin & Musshoff, Oliver, 2012. "Comparison of the Investment Behavior of German and Kazakhstani Farmers: an Experimental Approach," GlobalFood Discussion Papers 122422, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    17. repec:ags:aaea13:150610 is not listed on IDEAS
    18. Delbridge, Timothy A., 2013. "Threshold Effects in Transition to Organic Dairy Production," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150554, Agricultural and Applied Economics Association.
    19. Syster C. Maart-Noelck & Oliver Musshoff, 2013. "Investing Today or Tomorrow? An Experimental Approach to Farmers’ Decision Behaviour," Journal of Agricultural Economics, Wiley Blackwell, vol. 64(2), pages 295-318, June.
    20. Niemi, Jarkko K., 2012. "Designing coordination contracts to support efficient flow-scheduling in pork chain," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125208, Agricultural and Applied Economics Association.
    21. Huettel, Silke & Narayana, Rashmi & Odening, Martin, 2011. "Measuring dynamic efficiency under uncertainty," Structural Change in Agriculture/Strukturwandel im Agrarsektor (SiAg) Working Papers 129062, Humboldt University Berlin, Department of Agricultural Economics.
    22. Xianlei Ma & Justus Wesseler & Nico Heerink & Futian Qu, 2013. "Land Tenure Reforms and Land Conservation Investments in China ¨C What Does Real Option Value Theory Tell Us?," Review of Economics & Finance, Better Advances Press, Canada, vol. 3, pages 19-33, August.
    23. Maart, Syster Christin & Musshoff, Oliver & Odening, Martin & Schade, Christian, 2011. "Closing down the Farm: An Experimental Analysis of Disinvestment Timing," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114375, European Association of Agricultural Economists.
    24. Maart, S.C. & Mußhoff, O. & Odening, M. & Schade, C., 2011. "Zum Desinvestitionsverhalten landwirtschaftlicher Unternehmer: Ergebnisse einer experimentellen Unternehmung," Proceedings “Schriften der Gesellschaft für Wirtschafts- und Sozialwissenschaften des Landbaues e.V.”, German Association of Agricultural Economists (GEWISOLA), vol. 46, March.

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