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Okonomische Hysterese in der Veredlungsproduktion

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  • Hinrichs, Jan
  • Musshoff, Oliver
  • Odening, Martin

Abstract

German hog production responds only very limited to price fluctuations in the pork market. The hog production concentrates in a few regions though it does not depend on special natural conditions. Furthermore, the production volume does hardly vary over time. Relatively high market risks, sunk costs, and the flexibility of the decision maker to defer investments characterize decision problems hog production. Thus the real option approach is chosen to explain the inertia in production capacity. Using panel data of specialised hog farms from the German farm accountancy data network (FADN) an empirical investment model is estimated. Formally, the model has the structure of an 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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File URL: http://purl.umn.edu/18813
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Bibliographic Info

Paper provided by Humboldt University Berlin, Department of Agricultural Economics in its series Structural Change and Transition in the Agricultural Sector Working Papers with number 18813.

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Date of creation: 2005
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Handle: RePEc:ags:huiasc:18813

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Related research

Keywords: Economic Hysteresis; Risk; Real options; Hog production; Livestock Production/Industries;

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