Economic hysteresis in hog production

Jan Hinrichs, Oliver Musshoff and Martin Odening

Applied Economics, 2008, vol. 40, issue 3, 333-340

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.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

Downloads: (external link)
http://www.tandfonline.com/doi/abs/10.1080/00036840500447880 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:40:y:2008:i:3:p:333-340

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEC20

DOI: 10.1080/00036840500447880

Access Statistics for this article

Applied Economics is currently edited by Anita Phillips

More articles in Applied Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().