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Humboldt-Universität zu Berlin - Faculty of Life Sciences - Department of Agricultural Economics

DFG research unit SiAg 2010-2013

Structural Change in Agriculture

Objectives

This research unit takes a fresh look on structural change in agriculture in developed economies. The overall objective is the refinement, the extension and the integration of existing concepts, theories and instruments that facilitate the analysis of economic adjustment processes in the agricultural sector. With these tools at hand, a broader and clearer view of structural change can be derived that yields an improved understanding of causal relationships between entrepreneurial decisions, political instruments, and exogenous factors. A deeper understanding of these causalities, however, is an indispensable requirement for assessing and predicting structural change as well as for governing structural change in terms of economic, environmental, and social objectives. It is convenient to distinguish theoretical and methodological objectives on the one hand and applied objectives on the other hand. From a theoretical and methodological viewpoint the research unit faces the following challenges:

Existing theoretical models and empirical methods will be developed further to make them more realistic and more appropriate for analyzing adjustment processes in the agricultural sector. This holds for farm level models as well as for sectoral models. Challenges to be mentioned for farm level modeling are the inclusion of dynamics and uncertainty as well as the consideration of strategic aspects of decision-making. Moreover, the general premise of rational behavior that underlies most neoclassical models should be questioned and tested against the bounded-rationality hypothesis. Research questions which will be tackled with regard to sectoral models are the incorporation of stochasticity into market models, the handling of complex and interrelated multiple objectives in policy design models, as well as an improved assessment of the impact of complex trade policies with partial and general equilibrium models.

The sole refinement of partial models, however, is not sufficient when striving for a comprehensive view of structural change in agriculture. Therefore, another important objective of the research unit consists of a cross fertilization of different models. The informational exchange between models, which is necessary for their simultaneous use, will vary from an informal transfer of single parameters to a technical linkage of submodels. The awareness of the necessity to link different model types in the context of a policy impact analysis is not new and several composite models are available in agricultural economics. Nevertheless, the implementation of these integrated models is frequently carried out at an ad hoc basis. Thus, the theoretical foundation for a coherent linkage of simulation models on different aggregation levels is still an unsolved problem which SiAg-members want to address.

In agricultural economics, the development of models and methods is rarely an end in itself. In this research unit quantitative models are used to analyze matters of relevance to policymakers and society as a whole. For example, structural changes in the farm sector are analyzed which are due to reforms of the CAP, such as the abolishment of the dairy quota system, and to international trade regulation, such as the potential conclusion of the current Doha Round in the WTO. Furthermore, the enormous changes in the structure of the CAP – an increasing part of the budget is being allocated to rural development policies and decoupled direct payments – urges a more transparent and methodologically sound evaluation of these policies, which is undertaken within the research unit. New challenges arise for the agricultural sector from environmental as well as macroeconomic pressure. To an increasing extent, agriculture contributes to energy supplies worldwide. The net effect, however, on greenhouse gas (GHG) emissions is unclear, as increasing the production of energy crops results in more intensive land use and an extension of the agricultural area. As a basis for appropriate climate policies, the simultaneous analysis of agricultural production systems, markets and energy systems is essential.