New publication in "Journal of Agricultural Economics"
New publication: "Output market power and firm characteristics in dairy processing: Evidence from three EU countries". Koppenberg, Maximilian; Hirsch, Stefan. Journal of Agricultural Economics 2021
Abstract: The dairy processing industry is the largest subsector in the EU food industry and is characterised by high concentration. We investigate the extent of output market power exerted in EU dairy processing, applying an advanced stochastic frontier approach to estimate firm-level markups of price over marginal cost using data for France, Italy and Spain from 2008 to 2017. We further relate markups to firm characteristics to identify what type of dairy processors possess the highest power in the sector. Our findings only reveal small average deviations from perfect competition but we find considerable heterogeneity of markups within and between the three countries. We identify a strong positive relationship between markup and profitability, though we find firm size and markups to be inversely related. This indicates that small firms operating in differentiated niche markets are able to charge higher markups, thereby ensuring their profitability. This result can serve EU dairy processors for future strategic alignment, and is particularly interesting from a policy perspective as large firms are mostly blamed in the exercise of market power in public and policy debates.
New Publication in "Agribusiness"
New publication: "Markup estimation: A comparison of contemporary methods at the example of European food retailers." Koppenberg, Maximilian, Hirsch, Stefan. Agribusiness 2021
Abstract We compare the economic and econometric assumptions of two contemporary procedures for the estimation of markups, the stochastic frontier approach (SFA) and the production function approach (PFA), and apply them to EU food retailing over the period 2010–2018. Although, the estimates of the underlying technology of the two methods are similar, our results suggest that the PFA leads to significantly larger markups, yielding approximated excess consumer expenditures 58.14%–313.33% larger than predicted by the SFA. In addition, the correlation of markups between the two methods is low. This can have implications for the consistency of policy recommendations based on the SFA and the PFA as they yield different outcomes with respect to the state of competition in a market. Last, we find a link between market concentration and markups for the PFA pointing towards adverse effects of further concentration on consumer welfare, whereas our results show no evidence for a relationship between SFA markups and market concentration.
New Publication in "Food Quality and Preference"
New publication: "Which meat (substitute) to buy? Is Front of Package Information reliable to identify the healthier and more natural choice?". Petersen, Thies; Hartmann, Monika; Hirsch, Stefan. Food Quality and Preference 2021
Abstract: Environmental, ethical and health concerns have damaged the image of meat products for some consumer groups. As a result, the relevance of meat substitutes (MS) and the labelling of credence attributes has increased. However, it is unclear whether MS do indeed make the grade regarding nutritional quality when compared to meat and whether the Front-of-package (FOP) labelling provides reliable information for consumers. Therefore, in this article, we analyse the nutritional quality of different meat products and assess whether the FOP information is a reliable indication of nutritional quality and naturalness. Based on Mintel’s Global New Product Database, we analysed a sample of 5,482 innovations from the German meat market, covering a time-span of 9 years (2010-2018). We find an increasing number of MS entering the meat market, with a high-point in 2015. Further, we use Ofcom’s A-score to show that MS contain fewer ‘nutrients to limit’ than red meat (RM) and poultry meat (PM) innovations. In addition, PM and MS contain fewer food additives than RM. Finally, the FOP information is not always consistently related to superior nutritional quality and fewer food additives.
New Publication in "Food Policy"
New Publication: "Market-oriented agriculture and farm performance: Evidence from rural China". Zhang, Jian; Ashok, K. Mishra; Hirsch, Stefan. Food Policy 2021
Abstract: Part-time and small-scale farming used to be an essential factor in ensuring food security for small Chinese farmers. However, evidence shows that market-oriented farming (MOF) activities, such as renting-in land and cash cropping, are becoming more popular among farmers. This paper investigates the factors affecting farmers’ engagement in MOF and its impact on farm performance (profits, yields and costs). The study uses nationally representative data from a rural household survey and a multinomial endogenous switching treatment regression (MESTR) technique. Findings reveal that socioeconomic attributes, natural and physical assets, and institutions affect farmers’ participation in MOF activities. Renting-in land has allowed rural households to increase their farm profits by about 40%. However, despite increasing farm size, crop yields fell by about 47% due to land renting-in activities. Cash cropping increased both profits and yields by about 64% and 100%, respectively. Finally, the joint participation in renting-in land and cash cropping increased profits by nearly 158% and farm costs rose by about 41%.
New publication in "Agribusiness - an International Journal"
New publication: Maximilian Koppenberg, Martina Bozzola, Tobias Dalhaus, Stefan Hirsch "Mapping potential implications of temporary COVID‐19 export bans for the food supply in importing countries using precrisis trade flows"
Abstract: Despite pleas from international organizations, governments and trade economists to refrain from imposing trade‐distorting measures, over 20 countries have implemented bans on the export of agri‐food products since the onset of the COVID‐19 crisis. These export prohibitions might adversely impact food security and disrupt well‐established global supply chains. We identify importing countries that could potentially be affected by the imposed export bans using a measure of their import dependency during the pre‐pandemic period to illustrate our results on global trade maps. We find that many importers rely on just one country for a significant share of the overall domestic supply of a particular commodity.
Stefan Hirsch incoming Co-Editor of Agribusiness: an International Journal
Starting in January 2021 Stefan Hirsch will become main Co-Editor of Agribusiness: an International Journal (https://onlinelibrary.wiley.com/journal/15206297).
The new editorial team is completed by Monika Hartmann (University of Bonn), Wendy Umberger (University of Adelaide), Rigoberto Lopez (University of Connecticut), and Adam Rabinowitz (Auburn University) as coordinating editor.
New publication in "Journal of Agricultural and Resource Economics"
New publication: Khanal, R. A., Mishra K. A., Mayorga, J., and Hirsch, S. (2020): Choice of Contract Farming Strategies, Productivity, and Profits: Evidence from High-Value Crop Production
This study examines the impact of the choice of contract farming (CF) conditions on the productivity and profitability of ginger growers. Using farm-level data from Nepal and the selectivity-corrected multinomial endogenous switching regression (MESR) method, we found that ginger growers increased yields by 16%, 19%, and 15% by participating in CF with input conditions (IC), with output conditions (OC), and with input and output conditions (BC), respectively. Ginger growers also increased profits by participating in CF. Price difference in spot and contract markets, distance to market and transportation facilities, and farm location are important factors affecting participation in any form of CF.
Article on the Agricultural Policy Blog of ETH Zürich (Sep. 2020)
Please find here the latest blog post by Prof. Hirsch et al. on agrarpolitik-blog.com about Competitiveness and Profits in EU Grocery Retailing: A Comparison Between Leading Chains and Small Retailers (externer link)
New publication in "Agribusiness - An International Journal"
New publication: Hirsch, S., Lanter, D., and Finger, R. (2020): Profitability and profit persistence in EU food retailing: Differences between top competitors and fringe firms
We investigate the drivers and persistence of profits in EU food retailing by focusing on differences between “top competitors” and fringe food retailers using a sample of 12,786 firms from France, Spain, and Sweden between 2006 and 2014. We detect a high degree of profit persistence in food retailing, presumably caused by strong bargaining power towards processors. Moreover, we find that profit persistence is higher for “top competitors” such as members of Top‐5 chains regarding sales and that independent/specialized supermarkets generate lower profitability. The results provide insights regarding power imbalances in food retailing and thus support the development of managerial strategies as well as measures to enhance market efficiency.
New Publication in "Economics Letters"
New publication: Hirsch, S. and Koppenberg, M. (2020): Power imbalances in French food retailing: Evidence from a production function approach to estimate market power
We analyze whether an association of firms to the dominant oligopoly of food retail groups is related to higher oligopoly market power. We apply a production function approach for the estimation of firm-level markups to a sample of 3,366 French food retailers over the period 2006-2014. The results suggest the presence of power imbalances between firms of the dominant oligopoly and fringe firms. We also detect a positive connection between markups and profitability pointing to a reduction in consumer welfare due to retailers’ oligopoly market power.
New Publication in "Agricultural Economics"
New publication: Möhring, N., Bozzola, M., Hirsch, S., and Finger, R., (2020): Are pesticides risk decreasing? The relevance of pesticide indicator choice in empirical analysis. Agricultural Economics (in press).
The reduction of adverse health and environmental effects from pesticide use is currently a top priority on the agricultural policy agenda. Efficient pesticide policies must take into account farmers’ application behavior, especially effects of pesticide use on economic risk. However, previous results regarding the direction of risk effects of pesticides are ambiguous. We show that the ambiguity in earlier studies could be due to the pesticide indicator selected. Indicators which fail to account for the heterogeneous properties of pesticides may be inapt for interpreting farmers’ pesticide use decisions. Our analysis, based on a rich panel dataset of Swiss wheat producers with highly detailed information on pesticide use, considers different pesticide indicators and multiple sources of uncertainty. Our key finding is that indicator choice affects the magnitude and sign of estimated risk effects. Estimates of pesticide productivity and risk effects are significantly higher for fungicides, and even reversed for herbicides when we measure pesticide use in simple quantity units (kilogram per hectare) ‐ compared to the quality and intensity corrected Load Index. This means for example, that farmers will ceteris paribus use lower quantities of herbicides, but will increase the overall toxicity of the products applied with increasing risk aversion. We discuss implications of our findings for the design of pesticide policies and agricultural risk management instruments.
New Publication in "Agricultural Economics"
New Publication: D’Souza, A., Mishra, A.K. and Hirsch, S. (2019): Enhancing Food Security through Diet Quality: The Role of Off-Farm Work in Rural India. Agricultural Economics (in press).
India has achieved food security at the macro‐level. However, at the micro‐level, the country still struggles with extensive problems of food nutrition insecurity. In this paper, we assess the impact of non‐farm income and non‐farm work status (casual and full‐time non‐farm work) of operator, spouses, and couples on the diet quality of smallholder households in India. We find that non‐farm income decreases the likelihood of farming household being in the poor‐diet quality group by 31% and the medium‐diet quality group by 3%. Full‐time non‐farm work by operators and spouses decreases the likelihood of farming households being in the poor‐diet quality group by 3% and 9%, respectively. Finally, national programs like public food distribution programs increase the probability of rural farming households in the poor‐diet quality group. Findings from this study underscore the importance of non‐farm income and full‐time non‐farm work in improving diet quality of rural Indian households.
New publication in "Land Use Policy"
New publication: Jian Zhang, Ashok K. Mishra, Stefan Hirsch, Xiaoshun Li. (2020): Factors affecting farmland rental in rural China: Evidence of capitalization of grain subsidy payments. Land Use Policy 90 (2020).
This study investigates the factors affecting farmland rental prices in China. Special emphasis is put on the
capitalization of China’s grain subsidy program into land rental rates. Using national representative farm-level data, Heckman sample selection model, and quantile regression (QR) approach, we find that a 10% increase in grain subsidy payments for contracted farmland increases the farmland rental price by about 1%. However, quantile regression results show that the capitalization rate is heterogeneous and varies across the distribution. Findings suggest that family labor input and farm location are important factors driving up farmland rental prices. Moreover, for farm size, rental experience, and natural disaster we detect a negative impact on land rental prices.
Download article here:
Article in the agricultural policy blog of ETH Zurich
Please find here the latest blog post by Prof. Hirsch et al. at agrarpolitik-blog.com about "Production flexibility as driver for the competitiveness of milk processors".
New publication in "PLoS ONE"
New publication: Printezis, I., Grebitus, C. and Hirsch, S. (2019): The price is right!? A meta-regression analysis on willingness to pay for local food. PLoS ONE 14(5): e0215847.
We study the literature on willingness to pay (WTP) for local food by applying meta-regression analysis to a set of 35 eligible research papers that provide 86 estimates on consumers’ WTP for the attribute “local.” An analysis of the distribution of WTP measures suggests the presence of publication selection bias that favors larger and statistically significant results. The analyzed literature provides evidence for statistically significant differences among consumers’ WTP for various types of product. Moreover, we find that the methodological approach (choice experiments vs. other approaches) and the analyzed country can have a significant influence on the generated WTP for local.
New Publication in "Journal of Agricultural Economics"
New publication: Iyer, P., Bozzola, M., Hirsch, S., Meraner, M., and Finger, R. (2019): Measuring Farmer Risk Preferences in Europe: A Systematic Review. Journal of Agricultural Economics.
We present a systematic review of the extensive body of research on farmer risk preference measurement across Europe. We capture the methodological developments over time and discuss remaining challenges and potential areas for further research. Given the constantly evolving policy environment in Europe, and increasing climate‐change related risks and uncertainties, there is large value to be gained from enhancing our understanding of this fundamental aspect of farmers’ decision‐making processes and consequent actions.
New publication in "European Review of Agricultural Economics"
New publication: Hirsch, S., Mishra, A., Möhring, N. and Finger, R. (2019): Revisiting firm flexibility and efficiency: evidence from the EU dairy processing industry. European Review of Agricultural Economics.
We analyse the flexibility of EU dairy processors to adjust production to fluctuating economic conditions. For a set of 2,186 firms, we derive production flexibility measures representing the effect of output variations on costs. The results reveal that flexibility is highest in Poland and Italy and lowest in Spain. Several firm-specific factors, such as size and age of the firm, are found to affect firm flexibility. Moreover, we detect a tradeoff between flexibility and technical efficiency for large firms indicating that a sole focus on firm efficiency can be insufficient. Finally, the results show that during economic crisis flexibility can help to sustain profitability.
New Year reception at WZW, January 9, 2019
As part of the New Year reception at the TUM School of Life Sciences Weihenstepah, Prof. Hirsch was introduced as a newly appointed professor.
Here you can find a corresponding article published in Süddeutsche Zeitung:
New publication in "Data in Brief"
New publication: Fernau, E. and Hirsch, S. (2019): Meta-analysis data for the literature on dividend smoothing. Data in Brief (in press).
New Publication in "International Review of Financial Analysis"
New publication: Fernau, E. and Hirsch, S. (2018): What drives dividend smoothing? A meta regression analysis of the Lintner model. International Review of Financial Analysis (in press).
We revisit the view of dividend smoothing as one of the most robust findings in the empirical corporate finance literature by employing meta-regression analysis (MRA). Using 99 empirical studies that employ Lintner's dividend payout model we investigate the heterogeneity in reported dividend smoothing effects. We find evidence for (i) a mediocre degree of dividend smoothing across the analyzed literature, (ii) bi-directional publication bias -i.e. a tendency to preferably report positive and statistically significant smoothing as well as dividend smoothing coefficients close to zero (i.e. high speed of adjustment coefficients), and (iii) several drivers for the heterogeneity in reported smoothing coefficients such as the set of control variables or estimation technique. Our MRA can provide guidance for investors' expectations and future research on dividend smoothing.
New publication in “Applied Economics”
New publication in “Applied Economics”: Hirsch, S., Tiboldo, G. Lopez, R.A. (2018): A tale of two Italian cities: brand-level milk demand and price competition, Applied Economics, DOI: 10.1080/00036846.2018.1486016.
We apply the BLP random coefficient logit model demand model to fluid milk sales data from two north-south Italian cities: Turin and Naples. By virtue of their location and socioeconomic differences, these cities provide a natural experiment for contrasting consumer choices and retail market power related to milk physical and marketing characteristics. Results reveal that, regardless of location, consumers negatively value price increases, fat content and ultra-high temperature (UHT) treatment. However, location matters with respect to brand and type of milk purchased. While in Turin (the higher-income region) demand for the leading manufacturers’ brands is the most price inelastic, in Naples consumers have the lowest price elasticities in case of cheaper milk, often small manufacturer or private label brands. Unlike previous studies, we do not find price elasticities for private labels to be consistently lower (or markups to be higher) compared to manufacturer brands, indicating that private labels have reached maturity in these markets. Further, while demand for fresh milk is more price inelastic in Turin, it is more inelastic for UHT milk in Naples. Likewise, markups and Lerner indexes are higher for fresh milk in Turin and for UHT in Naples corresponding to the more inelastic demands under Bertrand price competition.
New Blog contribution regarding Risk determinants of German dairy farms
New Blog contribution regarding Risk determinants of German dairy farms.
Please click here to go to the article on Agrarpolitik-blog.com.
New publication in the “European Review of Agricultural Economics”
New publication in the “European Review of Agricultural Economics” Finger, R., Dalhaus, T., Allendorf, J. and Hirsch, S. “Determinants of downside risk exposure of dairy farms".
We investigate determinants of dairy producers’ risk exposure using a unique combination of foci on (i) downside risks, (ii) a holistic representation of revenues from milk and animal sales, (iii) climatic extremes and (iv) the role of animal health. A sample of German dairy farms reveals that animal health and heat stress indicators influence mean and semi-variance of revenues. For instance, heat stress exposure reduces expected milk revenues significantly. In the case of animal health-related indicators, our results show trade-offs between expected revenues and downside risks. Furthermore, variabilities in revenues from milk and animal sales are significantly interrelated.
Newly appointed Tenure Track Professor for Agricultural and Food Economics
On April 1st, 2018, Stefan Hirsch joined the Technical University of Munich School of Management as a W2 Tenure Track Professor for Agriculture and Food Economics located at the Campus Weihenstephan of the Technical University of Munich.
The professorship aims to improve the understanding of competitiveness and strategic actions of firms in the agricultural and food sector