Global Food Markets: Global Food Security - Challenge for Production and Consumption

Current Project

Department

Competition and Consumers

Project Management

Jana Friedrichsen

Project Period

July 1, 2015 - June 30, 2018

Funded by

Leibniz Association, Leibniz Competition 2015, Funding Line 4: Promoting women for academic leadership position

In Cooperation With

Departments "Firms and Markets" and "Public Ecomomics"

Scarce resources, the rising demand for agricultural products and growing land-use competition between the production of energy and food have increased the importance of strategies for food security. In the research project “Global Food Markets: Global Food Security – Challenges for Production and Consumption” both supply and demand-oriented approaches that can realize sustainable supply increases and improve consumption patterns are analyzed. Based on the analysis of vertical oligopolistic structures, the interactions along the agricultural value-added chains are investigated. Another emphasis is laid on the interplay between supply and consumer behavior. For example, the impact of product certification is analyzed, hence whether these are able to induce more sustainable production and consumer choices. The analyses comprise both theoretical and empirical parts and include aspects of behavioral economics.

Funding: Leibniz Association, Funding Line 4: Promoting women for academic leadership position of the Joint Initiative for Research and Innovation (Leibniz Competition 2015)

DIW Team

Research program

Currently 7.2 billion people inhabit the earth and this number is likely to increase considerably in the upcoming decades. At the same time, incomes are rising especially in the developing countries. This leads to an increasing demand for food and in particular for processed animal products whose production consumes much more resources than plant-based food. Additionally, agricultural resources are increasingly used for energy generation, for example because of politically fixed blending quotas. Due to the increasing scarcity of resources (water, soil, food) and in the face of climate change that will generate significant yield reductions in some parts of the world, the question arises of how to prevent imminent shortages in the global food supply. These issues motivate the research project Global Food Markets which aims to analyze supply and demand-oriented approaches to prevent future scarcities in food supply on the basis of theoretical and empirical industrial economics. It is the aim of the research project to understand the workings of internationally integrated agricultural markets. The influence of market structure, market power and strategic behavior of multi-national companies on market outcomes is crucial at this point. The research project is divided into three independent work packages:

Recent years have seen a growing emphasis on smallholder agriculture to achieve global food security and poverty alleviation in times of increasing pressures on food production. This raises at least two issues. First, the integration of smallholders in global trade directly leads to the question of whether trade is good for the poor. Second, a stronger involvement of small-scale farmers in trade does not only depend on improvements in productivity, but also on a better connection to markets, both domestically and globally. In addition to traditional constraints, like the lack of infrastructure, productive assets and insurance, smallholder access to export markets is increasingly challenged by new developments, especially by rising quality requirements in developed and emerging countries. Against this background, we analyze the domestic- and export-market participation of small-scale farmers in Kyrgyzstan. In particular, we are interested in the determinants of and the impact of quality requirements on smallholder market participation and welfare.

The demand for agricultural resources is expected to increase in the medium- to long-term due to population growth, a stronger demand for processed food products as well as the use of agricultural resources for energy purposes. As a result, competition for the scarce factor land will rise. In recent years, private, semi-public and public investors have been securing agricultural land for the production of food and energy crops by purchase or long-term lease agreements. The precise scale of such land deals (so-called land grabbing) is still unknown.

On the one hand, such land deals can secure domestic food production and energy provision (e.g., purchase of agricultural land by public investors to keep domestic prices low). On the other hand, however, land purchases by international investors and the associated vertical integration of production and processing can also be used as a strategic instrument to increase the investor’s market power by raising the prices of agricultural resources for non-integrated competitors.

Against this background, we will develop a theoretical model which covers the markets for land, agricultural resources and sales in the energy and food sectors and explicitly accounts for land-use and property rights. Based on the theoretical model, we will analyze the impact of changes in market structures in the energy and food sectors and of strategic interactions on the land-use equilibrium. In addition, we will study the role of resource competition between food production and energy generation for farmers and consumers. Finally, we will investigate how policy measures and subsidies in the fields of agriculture and energy impact land-use competition and market outcomes.

Sustainable consumption patterns can help to achieve food security. In addition to consuming sustainably produced goods, this also means reducing the high consumption of animal produce. In this empirically oriented work package, we plan to analyze consumer choices in the markets for coffee and milk as well as in abstract laboratory markets.

We want to estimate the willingness-to-pay for sustainably produced agricultural goods. Our focus is on Fairtrade and on organic products. In laboratory experiments, we investigate how the willingness-to-pay for Fairtrade chocolate depends on the context and how income affects the willingness to support firms that pay higher wages to their workers. Additionally, we want to compare consumer behavior in the markets for fair and conventional coffee using detailed consumer choice data.

Further, we empirically demonstrate the importance of correct assumptions about consumer behavior. In the empirical IO literature it is typically assumed that all consumers choose from the full set of products in the market. We develop an approach to formally test this assumption. In applications to the German retail markets for coffee and milk, we find that for coffee, a high-price category with strong product differentiation, the assumption of full, homogeneous choice sets performs well. For the low-price, limited-differentiation category of milk however consumers have mostly within-retailer choice sets which is inconsistent with the standard homogeneity assumption. Hence, the success of policies targeting different product markets depends crucially on how consumers make decisions in these markets.

Presentations at Scientific Conferences

Poster presentation
The impact of second-generation biofuels on market structure and social welfare
Isabel Teichmann
2018 ASSA Annual Meeting (AEA), Philadelphia, PA, USA
January 5-7, 2018

Can Sin Taxes Help Consumers with Low Self-Control? Evidence from Danish Soft Drink Tax Reforms
Renke Schmacker
Workshop on Behavioral Welfare Economics, DIW Berlin
November 2-3, 2017

Determinants and Welfare Effects of Smallholder Export Participation in Kyrgyzstan
Isabel Teichmann
Third Annual "Life in Kyrgyzstan" (LiK) Conference, Bishkek, Kyrgyzstan
October 12-13, 2017

Poster presentation
The Impact of Second-Generation Biofuels on Food-Fuel Competition and Land-Use Change
Isabel Teichmann
XV EAAE Congress "Towards Sustainable Agri-Food Systems: Balancing Between Markets and Society", Parma, Italy
August 28-September 1, 2017

Fairness in Markets and Market Experiments
Jana Friedrichsen
Brown Bag Seminar of the Cluster of Industrial Economics, DIW Berlin
July 7, 2017

Soft drink taxation and addiction
Renke Schmacker
Ce2 Workshop 2017, Warsaw, Poland
July 3-4, 2017

Shopping for a Better World
Jana Friedrichsen
Seminar "Handeln in Spannungsfeld ethischer Maxime und ökonomischer Grundsätze", Universität Siegen
June 26, 2017

Shopping for a Better World
Jana Friedrichsen
Lange Nacht der Wissenschaften, DIW Berlin
June 24, 2017

The rise and fall of the Danish soft drink tax
Renke Schmacker
Behavioural Economics Seminar, Copenhagen, Denmark
May 24, 2017

Determinants and welfare effects of smallholder export participation in Kyrgyzstan
Isabel Teichmann
3rd GlobalFood Symposium, Universität Göttingen
April 28-29, 2017

Fairness in markets and market experiments. A study using fair trade chocolate
Jana Friedrichsen
3rd GlobalFood Symposium, Universität Göttingen
April 28-29, 2017

How does Fairtrade Certification Affect Profit-Sharing in the Coffee Industry?
Helene Naegele
Food seminar, Toulouse, France
Februar 23, 2017

Signals Sell: Designing a Product Line when Consumers Have Social Image Concerns
Jana Friedrichsen
Christmas Meeting of the German Economists Abroad 2016, DIW Berlin
December 21-22, 2016

Who Cares about Social Image?
Jana Friedrichsen
Micro Reading Group, DIW Berlin
November 1, 2016

Inference of Choice Sets: Application to Grocery Retailing
Anna Lu
Demographischer Wandel: Jahrestagung 2016 des Vereins für Socialpolitik, Augsburg
September 4-7, 2016

The Effect of Relative Wealth on Pro-Social Behavior in Markets
Jana Friedrichsen
31st Annual Congress of the European Economic Association (EEA 2016), Geneva, Switzerland
August 22-26, 2016

Inference of Choice Sets in Grocery Retailing
Anna Lu
31st Annual Congress of the European Economic Association (EEA 2016), Geneva, Switzerland
August 22-26, 2016

The Effect of Wealth on Pro-Social Behavior in Markets
Jana Friedrichsen
Brown Bag Seminar of the Cluster of Industrial Economics, DIW Berlin
July 1, 2016

Determinants and Welfare Effects of Smallholder Export Participation in Kyrgyzstan
Isabel Teichmann, Damir Esenaliev
Agricultural Transitions along the Silk Road: Restructuring, Resources and Trade in the Central Asia Region : IAAE Inter-Conference Symposium, Almaty, Kasachstan
April 4-6, 2016

The Effect of Wealth on Pro-Social Behavior in Markets
Jana Friedrichsen
2015 European meeting of the Economic Science Association (ESA), Heidelberg
September 2-5, 2015

Signals Sell: Designing a Product Line when Consumers have Social Image Concerns
Jana Friedrichsen
30th Annual Congress of the European Economic Association (EEA), Mannheim
August 24-27, 2015

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