Determinants of agricultural cash rents in Germany: A spatial econometric analysis for farm-level data

We empirically analyse the determinants of cash rent levels for agricultural land in Lower Saxony, Germany. We are the first to apply a spatial econometrics approach that accounts for two types of spatial dependence simultaneously to cash rent data at the farm-level. Our empirical results underline the usefulness of such an approach. Farm characteristics which serve as a proxy for the marginal value of rented acreage for the tenant as well as variables which represent local competition on the land market are significant. Among the farm characteristics, operating revenue per hectare, share of high-value crops, soil quality, share of rented acreage, share of arable land relative to rented acreage, and animal density are significant while, ceteris paribus, neither labour nor machinery/buildings per hectare nor farm size are significant. In particular, animal density at the regional level increases the cash rent, underlining the importance of local competition on the land market. The analysis also shows that subsidies which foster competition among farmers for rented land boost landlords’ incomes. Thus, evaluation of set-aside programs or evaluation of public support for investment in pig or poultry production or renewable energies has to take such side-effects into account.Cash rent, farm-level data, spatial econometrics, Land Economics/Use,

Growth of German dairy farms under the EU milk quota

We estimate determinants of growth among German dairy farms between 1997 und 2005 under the EU milk quota system. Higher milk yield per cow, more family labour, and higher milk prices increase the growth rate of growing farms, ceteris paribus. Older growing farmers tend to grow at lower rates. In line with Weiss’ findings (1999) for Austrian farms, Gibrat’s Law of relative firm growth being independent of initial firm size does not hold for our subsample of farms growing in milk production, either: the growth rate is quite high for small farms and has a minimum for farms around 325,000 kg of initial quota. For the 16% of growing farms that have more initial quota the growth rate increases up to some out-of-sample maximum. We corrected for selection bias by means of a multinomial logit model which explains the choice among different growth regimes in more detail than the well-known Heckman procedure. In our case, e.g. age impacts the choice between growth and stagnation but not between growth and exiting from milk production; crop subsidies only influence the decision between growth and exiting from milk production but not the decision between growth and decline or stagnation.Keywords: farm growth, Gibrat’s Law, milk quota, multinomial logit, selection bias, Agricultural and Food Policy, Farm Management, Land Economics/Use,

Will markets direct investments under the Kyoto Protocol ?

Under the Kyoto Protocol, countries can meet treaty obligations by investing in projects that reduce or sequester greenhouse gases elsewhere. Prior to ratification, treaty participants agreed to launch country-based pilot projects, referred to collectively as Activities Implemented Jointly (AIJ), to test novel aspects of the project-related provisions. Relying on a 10-year history of projects, the authors investigate the determinants of AIJ investment. Their findings suggest that national political objectives and possibly deeper cultural ties influenced project selection. This characterization differs from the market-based assumptions that underlie well-known estimates of cost-savings related to the Protocol's flexibility mechanisms. The authors conclude that if approaches developed under the AIJ programs to approve projects are retained, benefits from Kyoto's flexibility provisions will be less than those widely anticipated.Environmental Economics&Policies,Investment and Investment Climate,Non Bank Financial Institutions,Energy Production and Transportation,Economic Theory&Research

Measurement and Comparison of Risk Reduction by Means of Farm Yield, Area Yield, and Weather Index Crop Insurance Schemes - The Case of Kazakhstani Wheat Farms

We analyse area yield insurance contracts and weather index insurance contracts in terms of risk reduction for wheat farms in Kazakhstan over the period 1980-2002. We combine the common mean-variance approach with a stochastic dominance approach to ensure the consistency of the empirical results with expected utility theory. Results indicate (1) the need for combining both approaches, because for some insurance schemes, the mean-variance results of one-third of the farmers are not necessarily consistent with EU theory. (2) Bootstrapping shows that an expected positive variance reduction is not statistically significant for up to one-third of the farms. Both results indicate that previous methods probably overestimate the effectiveness of crop yield and weather index insurance schemes, in particular for insurance schemes with basis risk. From a practical point of view, (3) area yield insurance based on the county (rayon) yield provides substantially higher variance reduction than reported in the literature, indicating that area yield insurance contracts might be more appropriate in Kazakhstan because of the high systemic yield risk there - an effect of exposure to drought. (4) There are no substantial differences in the results generated by means of different weather indexes. (5) However, compared to farm yield insurance with a low strike yield in order to reduce moral hazard, weather index insurance can be a reasonable alternative for farmers.Crop Production/Industries, Risk and Uncertainty,

AUCTIONING OUTCOME-BASED CONSERVATION CONTRACTS

This paper explores two ideas to enhance the performance of agri-environmental contracting schemes: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Controlled lab experiments were run in two countries, systematically varying the rate at which payments are linked to environmental outcomes. This paper clarifies the conditions under which the benefits from combining tenders with incentive payments outweigh the costs.Conservation tenders, auctions, incentive contracts, agricultural policy, environmental policy, market-based instruments, experimental economics, Auktionen, Ausschreibungsverfahren, Agrar-Umweltverträge, Agrar-Umweltpolitik, Anreizverträge, experimentelle Ökonomie, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Demand and Price Analysis, Political Economy,

The Impact of Corruption on Farmers' Efficiency in Rice Production: A Natural Experiment from Bangladesh

Crop Production/Industries,

ESTIMATING NON-CONCAVE METAFRONTIERS USING DATA ENVELOPE ANALYSIS

In this article we propose non-concave metafrontiers for estimating the inefficiency among production functions which do not necessarily belong to the same technology. In this case, estimating a joint production by literature approaches might be inappropriate. We call this inefficiency technological inefficiency and suggest Data Envelopment Analysis to construct a metafrontier production function which consists only of parts of different (group) frontier production functions. Thus, in contrast to the common literature our metafrontier does not need any assumptions additional to the group production functions. We illustrate our approach by means of a large sample of differently diversified crop farms. Results show that the literature approach overestimates the technological inefficiency in our sample for 75% of the observations and on average up to 7%-points in a diversification class of farms.Efficiency analysis, Metafrontier production function, Data Envelopment Analysis, Production Economics,

ORGANIC OR CONVENTIONAL? OPTIMAL DAIRY FARMING TECHNOLOGY UNDER THE EU MILK QUOTA SYSTEM AND ORGANIC SUBSIDIES

Organic farming, EU milk quota, Data Envelopment Analysis, subsidy payments, Agricultural and Food Policy,

Should we combine incentive payments and tendering for efficiently purchasing conservation services from landholders?

Policy makers aiming to get private landholders to provide non-marketed environmental services need to provide efficient economic incentives. Two ideas have been explored to achieve this: linking contract payments to environmental outcomes and putting the contracts up for tender. This paper investigates whether there are any gains to be had by combining the benefits of both approaches. Landholder risk aversion may offset incentive effects if the fall in participation outweighs any increases in individual effort. Using controlled lab experiments in two countries and across four subject groups, and systematically varying the rate at which payments are linked to uncertain outcomes, this paper clarifies the conditions under which incentives overcome risk-aversion – a parameter which was also measured. Results show that for risk averse landholders the most efficient approach is in general to tender contracts only moderately linked to environmental outcomes – that is, using a balanced combination of fixed input payments and of payments linked to uncertain outcomes. This paper also highlights how experiments can complement the inherent limitations of a purely theoretical analysis.Conservation tenders, auctions, incentive contracts, agricultural policy, environmental policy, market-based instruments, experimental economics, Agricultural and Food Policy, Environmental Economics and Policy,

EINFLUSS DER BIOGASERZEUGUNG AUF LANDWIRTSCHAFTLICHE PACHTPREISE IN DEUTSCHLAND

Biogas, Erneuerbare-Energien-Gesetz, Pachtpreise, räumliche Ökonometrie, Agricultural and Food Policy, Land Economics/Use, Research Methods/ Statistical Methods, Resource /Energy Economics and Policy,