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Micro-Economics of Beef.

Ronan Waters. Rural Economy Research Centre (RERC), Teagasc. Supervisor: Dr. Cathal O'Donoghue National University of Ireland Galway. 05/11/2009. Micro-Economics of Beef. Outline:. Introduction. Literature review. Methodology. Completed work so far. Conclusion. Introduction:.

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Micro-Economics of Beef.

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  1. Ronan Waters. Rural Economy Research Centre (RERC), Teagasc. Supervisor: Dr. Cathal O'Donoghue National University of Ireland Galway. 05/11/2009 Micro-Economics of Beef. Rural Economy Research Centre

  2. Outline: • Introduction. • Literature review. • Methodology. • Completed work so far. • Conclusion.

  3. Introduction: • The Irish Agricultural sector and significance the of the beef sector • Troubling times for the Beef farmers? • Aim of research: To develop an alternative modelling system to help understand the behaviour of beef farmers.

  4. Policy literature review: • A rich field of literature for this topic. • Decoupling of farm payments. • Modelling the behaviour of farmers: • Howley, Donnellan, Hanrahan. (2009) • Hennessy, Thorne. (2005) • Breen, Hennessy, Thorne. (2005) • The Linear Programming models are one of the more significant techniques.

  5. Methodology: • Aim is to develop a model to help understand the micro-economic behaviour of beef farmers. • Discrete Choice Model: McFadden approach. • Used in • Environmental Valuation (Hynes) • Transport Choice (McFadden) • Consumer Goods (Hensher) • Labour Supply Response to Policy Changes (Van Soest) • Education Choice (Flannery and O’Donoghue) • Using NFS for observed choices. • Going further: Simulating counter-factuals.

  6. Methodology: • Methodology • Observe actual choice attributes (stocking rate, off-farm, Policy, REPS, inputs, leisure etc)  Use NFS • Observe farm attributes (size, system, environment, demographics)  NFS and treated as exogenous • Simulate counter-factual choices for choices not made  Use a microsimulation model estimated using NFS • Utilise a discrete choice model to extract preference function (conditional logit/mixed logit) • Utilise derived econometric model to simulate the impact of alternative economic and policy changes

  7. Methodology continued: • Advantage • Does not assume profit maximisation • Behavioural parameters are estimated to reflect actual choices made relative to alternative options • Compatible with economic theory • Policy and market variation improves behavioural estimates • Challenges • Creating the utility function  what theoretically is the farmer optimising? This will influence model • Selection bias in microsimulation model  control using Heckman correction  what instruments to use? • Period of analysis Current year, medium term (breeding cycle), long term? • Multi-enterprise decisions

  8. Work concluded so far: • Literature review of the beef sector. • Statistical description of the dry stock industry through the use of NFS data. • Stata skills • Initial literature review and formative steps for designing the model.

  9. Rural Economy Research Centre Conclusion. The aim is to understand the micro-economic behaviour of farmers in Ireland. To achieve this will be using a discrete choice model. Go beyond the standard framework to incorporate the simulation of counterfactuals.

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