Okonomische Hysterese in der Veredlungsproduktion

Jan Hinrichs, Oliver Musshoff and Martin Odening

No 18813, Structural Change and Transition in the Agricultural Sector/ Strukturwandel und Transformation im Agrarbereich (SUTRA) Working Papers from Humboldt University Berlin, Department of Agricultural Economics

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.

Keywords: Livestock; Production/Industries (search for similar items in EconPapers)
Pages: 29
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:huiasc:18813

DOI: 10.22004/ag.econ.18813

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