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Tobit regression to estimate impact of EU market intervention in dairy sector

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  • Wocken, Meike
  • Kneib, Thomas
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    Abstract

    This study examines the effect of European intervention politics in the European butter market in the context of market liberalization using the example of Germany. A heteroscedastic Tobit model is estimated using German butter market data from 1973-2010. There is evidence that price support has reduced price instability in the butter market. Simulation indicates that enhancing intervention price causes an increase in the expected butter price in the long-run, even though if market price is higher than intervention level. We find changing effects of stockpiling. If difference between market and intervention price is small and stock quantity is high, it significantly contributes to reducing price volatility. On the contrary if price difference is large and stock quantity low, the effect of reducing price volatility decreases.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 123rd Seminar, February 23-24, 2012, Dublin, Ireland with number 122528.

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    Date of creation: 23 Feb 2012
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    Handle: RePEc:ags:eaa123:122528

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    Related research

    Keywords: Censored regression; market liberalization; butter market; Agricultural and Food Policy; Risk and Uncertainty; C5; D4; Q11.;

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    1. Hurd, Michael, 1979. "Estimation in truncated samples when there is heteroscedasticity," Journal of Econometrics, Elsevier, vol. 11(2-3), pages 247-258.
    2. Chavas, Jean-Paul & Kim, Kwansoo, 2001. "An Econometric Analysis Of The Effects Of Market Liberalization On Price Dynamics And Price Volatility," 2001 Annual meeting, August 5-8, Chicago, IL 20649, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Newey, Whitney K., 1987. "Specification tests for distributional assumptions in the Tobit model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 125-145.
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    8. Wright, Brian D & Williams, Jeffrey C, 1982. "The Economic Role of Commodity Storage," Economic Journal, Royal Economic Society, vol. 92(367), pages 596-614, September.
    9. Arne Henningsen & Ott Toomet, 2011. "maxLik: A package for maximum likelihood estimation in R," Computational Statistics, Springer, vol. 26(3), pages 443-458, September.
    10. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
    11. Roger Koenker, . "Censored Quantile Regression Redux," Journal of Statistical Software, American Statistical Association, vol. 27(i06).
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