Humboldt-Universität zu Berlin - Department of Agricultural Economics

Research

Market Integration and Border Effects in Agricultural Land Markets

This subproject of the research unit FORLand contributes to the overall objective of the research unit by empirically studying spatial price diffusion of agricultural land markets. We borrow the notion of spatial market integration from commodity price analysis and question whether traditional concepts, such as the law of one price, are meaningful to assess the economic efficiency of agricultural land markets. Moreover, we aim at a better understanding of regional disparities in agricultural land markets by adapting and using models from economic geography. Thus, our results will provide insights into existing market rigidities and potential needs for regulations of land markets. More specifically, we will deal with the following objectives and research questions:
a) Can the concept of spatial market integration be adapted to agricultural land markets? We will scrutinize the theoretical preconditions of the law of one price and examine the effect of their violations in the context of land markets. Together with subproject 7 (Lakes/Müller), we will adapt concepts from economic geography to explain the coexistence of multiple spatial equilibria.
b) How can land price convergence clubs be identified?Using various spatio-temporal price diffusion models, we will identify regions showing similar price dynamics and investigate to what extent these regional markets are spatially integrated. The empirical analysis will be conducted for Germany and the Czech Republic.
c) How can the existence of convergence clubs on agricultural land markets be explained?Potential reasons could be regionally different roles of non-agricultural investors, farm size structures, or production structures. Special attention will be given to the impact of borders on the convergence of land prices.
 
Research unit FORLand:
 

Implementation of Risk Management Tools for Wind Power Industry

This transfer project aims at the prototype application of several risk management tools, which have been developed in the CRC 649 “Economic Risk”, in the context of wind energy production. First, the wind energy index will be refined and applied with regard to topical questions, such as local feed-in tariffs or wind park valuation. Second, we will work on managing grid stability with a volatility forecasting model for wind power production and hedging weather-dependent production losses with wind derivatives. Third, we will evaluate the efficiency of wind turbines to allow for specific technical improvements.

http://sfb649.wiwi.hu-berlin.de/projects/index.php#project_t

App for assessing the wind energy potential at locations in Germany:
https://wind-energy-index.shinyapps.io/version2018/

 

Potential of Wind Energy in Urban Areas: Gaza City as a Case Study

This project contributes to a more stabilized, decentralized energy production in Gaza City to meet the strong energy demand, to lower the number of outages, and to mitigate the consequences of blackouts. For this purpose, it is analysed based on wind sensors how suitable the flat roofs in Gaza City are as locations for small wind turbines. The main scientific goal of the project lies in the analysis of wind energy production in densely populated cities based on a measure-based study. Moreover, policy recommendations on the wind energy use in urban areas should be elaborated, which are derived from real measurements at different heights in Gaza City. Finally, the application of a small wind turbine on the roof of a residential building will be evaluated.

 

Weather Risk Management

Weather constitutes an important macroeconomic risk, which is of particular relevance for agricultural production. In fact, weather risks are a major source of uncertainty in crop production. Due to the climatic change it is expected that extreme weather events will occur more frequently in the future. This subproject investigates the potential use of weather derivatives in agriculture. The overall objective of this research project is to assess the potential demand and supply for weather derivatives and index based weather insurance in agriculture under varying climate and production conditions. Previous calculations show that a considerable magnitude of basis risk is inherent to index-based weather insurance in the agribusiness sector. Geographical basis risk, in conjunction with production related basis risk, erodes the potential advantages of weather derivatives over traditional crop insurance.
 
Moreover, we want to investigate to what extent weather derivatives can be used to transfer the risk of widespread correlated agricultural production losses outside this sector. Traditional reinsurance contracts have been often criticized as being inefficient due to sloppy settlement practices of insurers and high transaction costs. In order to overcome these problems the direct transfer of weather risks to the capital market via weather derivatives (e.g. weather bonds) has been proposed as an alternative.