Current Research Projects
more research projects: research data base of Humboldt-Universität zu Berlin
Land is a crucial production factor in agriculture. In developed countries this input factor is usually in short supply and its overall availability shrinks permanently. On the contrary, the increasing demand of growing farms and more recently of non-agricultural investors causes price pressure on the land market. Thus, it is not surprising that land prices increased in recent years. Though the analysis of land markets is a core topic in agricultural economics, many questions are still unanswered. For example, do land prices reflect the price boom for agricultural commodities and bio-energy? Can land prices be fully explained by fundamental factors or are they also driven by speculative bubbles? What is the role of non-agricultural investors? Should land markets be regulated and if so, what are the most efficient instruments?
Against this background the project aims at understanding the recent developments on land markets, particularly in Germany and the EU. The focus will be on quantitative modelling and empirical (econometric) analyses.
Contact: Prof. Dr. Martin Odening, m.odening(at)agrar.hu-berlin.de
Cooperation: Prof. Dr. Silke Hüttel, silke.huettel(at)uni-rostock.de, Universität Rostock
Crop insurance plays an important role in hedging weather risk in agriculture because agricultural production is severely affected by weather conditions. However, worldwide experience shows that it is rather difficult to establish a market for private (non-subsidized) crop insurance. In recent years, numerous studies have examined the causes of market failures and have conjectured that these failures mainly result from the existence of systemic weather risk. Nevertheless, it is still unclear how to model the impact of systemic weather risk on the viability of crop insurance markets.
Against this background, the objective of the research project is to analyze the demand and supply for weather insurance. For that purpose we develop an equilibrium pricing model based on the expected utility maximization of market participants that takes into account the effect of systemic weather risk. Moreover, this study analyzes the necessity and the efficiency of government subsidies in the crop insurance market.
Contact: Dr. Zhiwei Shen, shenzhiw(at)agrar.hu-berlin.de
Land is an immobile and non-replicable production factor. Since in most Western countries all agricultural land is under usage, this represents a capacity constraint and thus determines an upper production limit. A single firm can only expand its capacity and reach a significantly higher output if another one ceases production and drops out of the market. Thus, exit is a precondition for external market entry and further growth of incumbents. Unfortunately, most of the former studies dealing with entry/exit of firms and dynamic competition do not provide a model that takes these features into account.
The main objective of this research project is to develop a dynamic framework which describes the optimal investment/disinvestment strategies of heterogeneous firms under the above mentioned constraints. The optimal individual behaviour allows computing a dynamic equilibrium and deriving implications for the prospective market structure in the agricultural sector. For this purpose it is necessary to incorporate uncertainty into the model as demand or productivity shocks may force firms to withdraw from the market. This usually causes a new allocation of resources and may give rise to an increasing market concentration.
Contact: Stefan Kersting, kersting(at)agrar.hu-berlin.de
In general, liquidity in agricultural commodity markets is comparatively low. Amongst other factors, it is the asymmetric distribution of information between market participants which is considered to influence the liquidity in a marketplace. The asymmetry of information ultimately becomes apparent through the order arrival process in the order book, which is also providing further insights into the price formation process. Thus, we place the order book and the order arrival process in the focus of these investigations, to understand liquidity and effects of policy measures such as the European Commission’s Directive on markets in financial instruments (MiFID 2) on liquidity in agricultural commodity markets.
Contact: Steffen Volkenand, steffen.volkenand(at)agrar.hu-berlin.de
Recent spikes in food prices and the high liquidity on international financial markets have boosted the demand for land. As a result, agricultural land prices have steadily increased over the past decade in many parts of the world. These developments have triggered a debate on whether current legislation is still appropriate or whether there is a need for revision and tightening.
The general objective of this project is to investigate the efficiency of agricultural land markets via spatial market integration. We scrutinize the applicability of the law of one price to land markets while distinguishing between absolute and relative versions of this “law”. Panel data unit root and stationarity tests are applied to land sale prices in the German state Lower Saxony where we detect three main clusters with different price developments. Our results indicate that the law of one price holds only locally due to structural differences among regions.
Contact: Xinyue Yang, yangxiny(at)agrar.hu-berlin.de