Determinants of farmer retirement and farm succession in Finland

In the past decade, the Finnish agricultural sector has undergone rapid structural changes. The number of farms has decreased and the average farm size has increased when the number of farms transferred to new entrants has decreased. Part of the structural change in agriculture is manifested in early retirement programmes. In studying farmers exit behaviour in different countries, institutional differences, incentive programmes and constraints are found to matter. In Finland, farmers early retirement programmes were first introduced in 1974 and, during the last ten years, they have been carried out within the European Union framework for these programmes. The early retirement benefits are farmer specific and de-pend on the level of pension insurance the farmer has paid over his active farming years. In order to predict the future development of the agricultural sector, farmers have been frequently asked about their future plans and their plans for succession. However, the plans the farmers made for succession have been found to be time inconsistent. This study estimates the value of farmers stated succession plans in predicting revealed succession decisions. A stated succession plan exists when a farmer answers in a survey questionnaire that the farm is going to be transferred to a new entrant within a five-year period. The succession is revealed when the farm is transferred to a suc-cessor. Stated and revealed behaviour was estimated as a recursive Binomial Probit Model, which accounts for the censoring of the decision variables and controls for a potential correlation between the two equations. The results suggest that the succession plans, as stated by elderly farmers in the questionnaires, do not provide information that is significant and valuable in predicting true, com-pleted successions. Therefore, farmer exit should be analysed based on observed behaviour rather than on stated plans and intentions. As farm retirement plays a crucial role in determining the characteristics of structural change in agriculture, it is important to establish the factors which determine an exit from farming among eld-erly farmers and how off-farm income and income losses affect their exit choices. In this study, the observed choice of pension scheme by elderly farmers was analysed by a bivariate probit model. Despite some variations in significance and the effects of each factor, the ages of the farmer and spouse, the age and number of potential successors, farm size, income loss when retiring and the location of the farm together with the production line were found to be the most important determi-nants of early retirement and the transfer or closure of farms. Recently, the labour status of the spouse has been found to contribute significantly to individual retirement decisions. In this study, the effect of spousal retirement and economic incentives related to the timing of a farming couple s early retirement decision were analysed with a duration model. The results suggest that an expected pension in particular advances farm transfers. It was found that on farms operated by a couple, both early retirement and farm succession took place more often than on farms operated by a single person. However, the existence of a spouse delayed the timing of early retirement. Farming couples were found to co-ordinate their early retirement decisions when they both exit through agricultural retirement programmes, but such a co-ordination did not exist when one of the spouses retired under other pension schemes. Besides changes in the agricultural structure, the share and amount of off-farm income of a farm family s total income has also increased. In the study, the effect of off-farm income on farmers retirement decisions, in addition to other financial factors, was analysed. The unknown parameters were first estimated by a switching-type multivariate probit model and then by the simulated maxi-mum likelihood (SML) method, controlling for farmer specific fixed effects and serial correlation of the errors. The results suggest that elderly farmers off-farm income is a significant determinant in a farmer s choice to exit and close down the farm. However, off-farm income only has a short term effect on structural changes in agriculture since it does not significantly contribute to the timing of farm successions.

Valuation of reduced eutrophication in the Gulf of Finland : Choice experiment with attention to heterogeneous and discontinuous preferences and respondent uncertainty

Eutrophication of the Baltic Sea is a serious problem. This thesis estimates the benefit to Finns from reduced eutrophication in the Gulf of Finland, the most eutrophied part of the Baltic Sea, by applying the choice experiment method, which belongs to the family of stated preference methods. Because stated preference methods have been subject to criticism, e.g., due to their hypothetical survey context, this thesis contributes to the discussion by studying two anomalies that may lead to biased welfare estimates: respondent uncertainty and preference discontinuity. The former refers to the difficulty of stating one s preferences for an environmental good in a hypothetical context. The latter implies a departure from the continuity assumption of conventional consumer theory, which forms the basis for the method and the analysis. In the three essays of the thesis, discrete choice data are analyzed with the multinomial logit and mixed logit models. On average, Finns are willing to contribute to the water quality improvement. The probability for willingness increases with residential or recreational contact with the gulf, higher than average income, younger than average age, and the absence of dependent children in the household. On average, for Finns the relatively most important characteristic of water quality is water clarity followed by the desire for fewer occurrences of blue-green algae. For future nutrient reduction scenarios, the annual mean household willingness to pay estimates range from 271 to 448 and the aggregate welfare estimates for Finns range from 28 billion to 54 billion euros, depending on the model and the intensity of the reduction. Out of the respondents (N=726), 72.1% state in a follow-up question that they are either Certain or Quite certain about their answer when choosing the preferred alternative in the experiment. Based on the analysis of other follow-up questions and another sample (N=307), 10.4% of the respondents are identified as potentially having discontinuous preferences. In relation to both anomalies, the respondent- and questionnaire-specific variables are found among the underlying causes and a departure from standard analysis may improve the model fit and the efficiency of estimates, depending on the chosen modeling approach. The introduction of uncertainty about the future state of the Gulf increases the acceptance of the valuation scenario which may indicate an increased credibility of a proposed scenario. In conclusion, modeling preference heterogeneity is an essential part of the analysis of discrete choice data. The results regarding uncertainty in stating one s preferences and non-standard choice behavior are promising: accounting for these anomalies in the analysis may improve the precision of the estimates of benefit from reduced eutrophication in the Gulf of Finland.

Keittiömaailman matkassa 20 vuotta : Tutkimus erään keittiökalustevalmistajan johtavan markkina-aseman rakentamisesta ja säilyttämisestä

A View into the World of Kitchen: Development and retention of a leading position in the market of kitchen interiors - a case study of 20 years. This study focuses on the development of a kitchen interiors company, presently called Novart Inc., into the leading company of the industry from 1980´s to the present. The objective of the study is to describe the effects of strategic choices, the decisions of the management and the owner´s direction and control to the build up and the retaining of the leading position in the market. From theory point of view, strategic choices refer to com-pany purchases as corporate-level strategies, and business and marketing strategies. The empirical research was carried out in two phases and it is based on various company documents and records, and on the intensive interviews of seven key executives in the company. An abductive research design was utilized. The company gained the leading position in the kitchen market in Finland by company purchases, and the company has been able to retain the position. Firstly the goal was to expand to retail market and, secondly, the company has maintained the balance of supply and demand by closing the purchased production units when needed. The simultaneous use of these two strategic goals is a kind of a new observation, and the strategy may be suitable only for market leaders. During the latter part of the research period the strategy of com-pany purchases has been abandoned and the leading position in the market has been main-tained by developing systematically business and marketing capability. In the business and marketing strategies the distribution channels and the brands have been emphasized. During the research period the company has almost totally abandoned the long distribution channels and started to use its own channels built and named after the main brands. These are A la Carte, Parma and Petra. At the moment, in the beginning of the 21st century, a new distribution channel, the concept of the Kitchen World, is being built in addition to the channels mentioned above. The management´s decision making and the implementation the decisions have been well-considered. The executives emphasized the valuing of the importance of the decisions dif-ferently except the two decisions named the most important ones, i.e., the decisions to start own production of the raw material and to concentrate the business only to one company. The executive staff has also succeeded in managing crisis and threats of bankruptcy, and the company has been managed profitable. During all the four terms of ownership: Puolimatka Corporation, the Hankkija/Novera Corporation, the ownership period of the "bank", and the Nobia Corporate the ownership direction and control has been somewhat different. All the owners have paid attention to economic issues. The direction of cash flows and investments was at its strongest during the Hankkija/Novera term. For the last owner Nobia the production and marketing of the kitchen interiors has been the core business, which thus has strengthened the business and marketing capabilities of the target company of this research. A common denominator during all the four terms of ownership has been owners' trust gained by the professional skills of the management of the target company. This has lead to greater independence of the management of the company and less owners´ direction. Keywords: leading position, marketing strategy, management decisions, acquisition, corporate governance

Uusmaalaisten viljelijöiden arviot uudesta ympäristötuesta

The agro-environmental subsidy scheme is the most important agricultural environmental policy instrument used in Finland. The principal aim of the agro-environmental subsidy is to reimburse farmer the costs of using environmentally sounder farming practices and the measures that aim for preserving the environment. It also serves as an economic incentive for ensuring the large enough participation. The agro-environmental subsidy scheme is to be reformed in 2007. The main question answered in thesis was that whether farmers in Uusimaa region are ready to participate in the environmental subsidy scheme on the basis of the economical reasons or not. The focus is on farmers' opinions about how difficult it is to carry out measures of new environmental subsidy and do these measures change their ways of farming. The analysis is based on an empirical study of the farmers attitudes towards the new environmental subsidy scheme. The theoretical framework of this thesis is based on principal-agent theory and on the theory of the firm. In principal-agent theory environmental subsidy is interpreted as a deal in which farmers function as agents and government as a principal. Theory of the firm provides a theoretical framework for the analysis, through which we aim to analyse how rationally behaving farmer makes decisions by economical reasons to participate in the environment subsidy scheme. The thesis points out that presumably the participation percentage will stay high during the period of the new environmental subsidy scheme.

Kymijoen vaelluskalojen nousureittien avaamisen kustannusten ja hyötyjen arviointi

The objective of this thesis is to evaluate different means of increasing natural reproduction of migratory fish, especially salmon, in the river Kymijoki. The original stocks of migratory fish in Kymijoki were lost by the 1950s because of hydropower plants and worsened quality of water in the river. Nowadays the salmon stocks is based on hatchery-reared fish, even though there is significant potential of natural smolt production in the river. The main problem in the natural reproduction is that the migratory fish cannot ascend to the reproduction areas above the Korkeakoski and Koivukoski hydropower plants. In this thesis alternative projects which aim to open these ascencion routes and their costs and benefits are evaluated. The method used in the evaluation is social cost-benefit analysis. The alternative projects evaluated in this thesis consist of projects that aim to change the flow patterns between the eastern branches of Kymijoki and projects that involve building a fish ladder. Also different combinations of these projects are considered. The objective of this thesis is to find the project that is the most profitable to execute; this evaluation can be done in comparing the net present values of the projects. In addition to this, a sensitivity analysis will be made on the parameter values that are most uncertain. We compare the net present values of the projects with the net present values of hatchery-reared smolt releases, so we can evaluate, if the projects or the smolt releases are more socially profitable in the long term. The results of this thesis indicate that especially the projects that involve building a fish ladder next to the Korkeakoski hydropower plant are the most socially profitable. If this fish ladder would be built, the natural reproduction of salmon in the Kymijoki river could become so extensive, that hatchery-reared smolt releases could even be stopped. The results of the sensivity analysis indicate that the net present values of the projects depend especially on the initial smolt survival rate of wild salmon and the functioning of the potential fish ladder in Korkeakoski. Also the changes of other parameter values influence the results of the cost-benefit analysis, but not as significantly. When the net present values of the projects and the smolt releases are compared, the results depend on which period of time is selected to count the average catches of reared salmon. If the average of the last 5 years catches is used in counting the net benefits of smolt releases, all the alternative projects are more profitable than the releases. When the average of the last 10 years is used, only building of the fish ladder in Korkeakoski and all the project combinations are more profitable than the smolt releases.

Liikennepolttoaineeksi tarkoitettu ohraetanoli, Suomen ohramarkkinat ja ilmastonmuutos

The aim of the thesis was to analyze the use of barley as an input for bioethanol production and the impacts the use has on the Finnish barley markets. Two main research questions were formulated. First, privately and socially optimal bioethanol production levels were examined. In the social optimum, the climate benefits of bioethanol production were considered. It was calculated that the production and use of bioethanol created smaller CO2 -emissions when compared with the production and use of gasoline. Second, the impacts of bioethanol production on farmland allocation and agricultural production were analyzed. In more detail, the second aim was to analyze the farmland allocation between wheat and barley cultivation and green set aside in the private and social optimum. An analytical model was produced to analyze the barley markets in Finland. To provide an empirical counterpart to this model, existing research data on bioethanol production and barley cultivation was used. The aim of the model was to analyze the supply and the demand as well as market equilibrium of barley. Furthermore, the model provided a framework for analyzing the differences between the private optimum and social optimum of bioethanol production in Finland. The demand for barley consists of animal feed demand and bioethanol demand. On the supply side, a heterogeneous model of farmland quality was used. With this framework, it is possible to analyze farmland allocation between barley and wheat cultivation and green set aside and how the climate benefits of bioethanol production affects the allocation. Moreover, the relative changes in barley price between the private and social optimum were analyzed. Based on the empirical analysis, the private optimum for barley based bioethanol production is 58 691 metric tons. However, the social optimum for barley based bioethanol production is 72 736 metric tons. The portion of farmland that is allocated to barley cultivation is increased if the climate benefits of bioethanol production are considered. In the private optimum, 1/19 of the total farmland is allocated to barley cultivation whereas in social optimum the share increases to 7/19. Furthermore, the increase in barley price between private and social optimum is rather modest. Total increase in price is only about 1,8 percent.

Sianlihan tuotantoon vaikuttavat tekijät vuosina 1995-2006

Ennen Suomen EU-jäsenyyttä kansallisen maatalouspolitiikan yksi päätavoitteista oli elintarvikeomavaraisuus. Tavoitteen saavuttamiseksi Suomessa oli maatalouspolitiikan osalta käytössä hintatukijärjestelmä, jossa yksi pääasiallisista tuotannon ohjauskeinoista oli tavoitehinnat, joilla valtiovalta pyrki vaikuttamaan tuottajahintoihin. Tavoitehintojen avulla tuottajat pystyivät ennakoimaan tulevan hintatason ja näin siirtämään tuotantoaan taloudellisesti kannattavimpaan suuntaan. Tästä oli kuitenkin seurauksena kotimaisen elintarvikeomavaraisuuden ylittyminen varsinkin eläinkunnan tuotteiden osalta. Vuonna 1994 lihatuotteiden yhteenlaskettu omavaisuus oli 110 prosenttia. Sianlihan osalta omavaisuus oli hieman tätä suurempi, 114 prosenttia. Suomen liityttyä EU:n jäsenmaaksi vuonna 1995 tavoitehinnoista luovuttiin ja samalla tuottajahinnat putosivat. Korvaukseksi tuottajahintojen pudotuksesta tuottajille alettiin maksaa suoria tulotukia. Tutkimuksen tarkoituksena oli selvittää mitkä tekijät vaikuttivat sianlihan tuotantopäätöksiin maatalouden muuttuneessa toimintaympäristössä ja miten yhteisen maatalouspolitiikan uudistukset vaikuttivat sianlihan tarjontaan. Tutkimuksen tarkasteluaikavälinä olivat vuodet 1995 2006. Tutkimuksen tavoitteena oli myös tuotantoon vaikuttavien tekijöiden pohjalta ennustaa sianlihan tuotantoa vuoteen 2013. Tuotantopäätöksiin vaikuttavia tekijöitä tarkasteltiin regressio-analyysin avulla, jotta saataisiin selville sianlihan tuotantoa parhaiten selittävät tekijät. Tutkimuksen aikasarja-aineisto poimittiin maa- ja metsätalousministeriön tietopalvelukeskuksen (Tike:n) ja tilastokeskuksen julkaisemista ja ylläpitämistä tilastoista. Sianlihan tuotantoon vaikuttavien tekijöiden ennusteisiin tutkimuksessa käytettiin sekä kansainvälisten että kotimaisten taloustutkimuslaitosten ja organisaatioiden ennusteita. Tutkimuksen teoreettinen viitekehys muodostui yrityksen teoriasta, tarjontateoriasta ja aikavälin merkityksestä tarjontaan. Tuotantomallin estimoinnin tuloksena sianlihan tuotantoon vaikuttivat vuosien 1996 2006 aikana sianlihan tuotannon tuottavuuden kasvua kuvaava teknologiamuuttuja, neljällä neljänneksellä viivästetty sianlihan tuottajahinta ja tuotantotuet yhteenlaskettuna, kolmella neljänneksellä viivästetty vehnän tuottajahinta, kahdeksalla neljänneksellä viivästetty sianlihan tuotanto, kahdella neljänneksellä viivästetty porsaan välityshinta ja kuudella neljänneksellä viivästetty investointituet. Sianlihan tuotantomallin selitysasteeksi saatiin 0,91. Estimoidulla tuotantomallilla ennustettiin sianlihan tuotannon kehitystä vuosina 2007 2013. Perusskenaariossa tuotannon ennustettiin muuttuvan vuodesta 2007 eteenpäin samalla tavalla kuin vuosina 1995 2006 keskimäärin. Perusskenaarion lisäksi tuotantomallilla simuloitiin tuotantotukien ja investointitukien dekoplauksen vaikutusta sianlihan tuotantoon. Tuotantotukien dekoplauksen myötä sianlihan tuotanto laskisi 177 milj. kiloon vuonna 2009, mutta nousisi 193 milj. kiloon vuonna 2013. Investointitukien dekoplauksen myötä tuotanto laskisi 176 milj. kiloon vuonna 2009 ja nousisi vuoteen 2013 mennessä 191 milj. kiloon. Suurimman pudotuksen aiheutti kuitenkin vehnän tuottajahinnan nousu vuosien 2006 ja 2007 aikana, jonka seurauksena sianlihan tuotanto laskisi jo vuonna 2008 180 milj. kiloon.

The Impact of Emissions Trading on the Price of Electricity in Nord Pool : Market Power and Price Determination in the Nordic Electricity Market

The objective of this thesis is to find out how dominant firms in a liberalised electricity market will react when they face an increase in the level of costs due to emissions trading, and how this will effect the price of electricity. The Nordic electricity market is chosen as the setting in which to examine the question, since recent studies on the subject suggest that interaction between electricity markets and emissions trading is very much dependent on conditions specific to each market area. There is reason to believe that imperfect competition prevails in the Nordic market, thus the issue is approached through the theory of oligopolistic competition. The generation capacity available at the market, marginal cost of electricity production and seasonal levels of demand form the data based on which the dominant firms are modelled using the Cournot model of competition. The calculations are made for two levels of demand, high and low, and with several values of demand elasticity. The producers are first modelled under no carbon costs and then by adding the cost of carbon dioxide at 20€/t to those technologies subject to carbon regulation. In all cases the situation under perfect competition is determined as a comparison point for the results of the Cournot game. The results imply that the potential for market power does exist on the Nordic market, but the possibility for exercising market power depends on the demand level. In season of high demand the dominant firms may raise the price significantly above competitive levels, and the situation is aggravated when the cost of carbon dioixide is accounted for. Under low demand leves there is no difference between perfect and imperfect competition. The results are highly dependent on the price elasticity of demand.

Hintakäsitykset funktionaalisista elintarvikkeista ja euron käyttöönoton vaikutus

Työn tavoitteena oli tutkia kuluttajien hintakäsityksiä funktionaalisista elintarvikkeista sekä euron käyttöönoton vaikutuksia niihin. Teoriaosassa tarkasteltiin funktionaalisen elintarvikkeen käsitettä ja sen hintaan liittyviä kysymyksiä erikoistuotteen näkökulmasta sekä kuluttajan hintakäsityksen muodostumisessa tärkeää osaa näyttelevää referenssihintaa ja sen vaikutuksia sekä teoreettista taustaa, erityisesti adaptaatiotasoteoriaa. Lisäksi tarkasteltiin euron mahdollisia vaikutuksia referenssihintaan sekä referenssihinnan roolia kuluttajan hintakäsityksen muodostumisessa. Työn empiirinen osa koostui kahdesta kyselytutkimuksesta, jotka suoritettiin ennen euron käyttöönottoa joulukuussa 2001 ja sen jälkeen huhtikuussa 2002. Ensimmäiseen kyselyyn vastasi 182 ja toiseen 135 vastaajaa. Vastaajat olivat pääkaupunki- sekä Hämeenlinnan seudulta. Tutkimuksen kohteena olevat tuotteet olivat Gefilus®-piimä ja -mehut, ja kohderyhmänä niiden käyttäjät. Tutkimuksen empiirisessä osassa selvitettiin funktionaalisten elintarvikkeiden käyttö- ja ostotottumuksia sekä mielipidettä niiden hintatasosta suhteessa terveysvaikutuksiin ja tavallisiin elintarvikkeisiin. Referenssihintoja tutkimuksen kohteena oleville tuotteille tutkittiin sopivana, korkeimpana ja alhaisimpana hyväksyttävänä hintana.Euron vaikutuksia hintakäsityksiin tutkittiin vastausten eroissa kyselyjen välillä. Euron käyttöönoton aiheuttamia referenssihintojen muutoksia tarkasteltiin hintaherkkyysmittari avulla. Lisäksi tutkittiin euron käyttöönoton aiheuttamia muutoksia ostokäyttäytymisessä. Faktori- ja ryhmittelyanalyyseja käytettiin vastaajien ryhmittelyyn. Funktionaalisia elintarvikkeita pidettiin vastaajien joukossa kalliina suhteessa niiden terveysvaikutuksiin tai tavallisten, ei-funktionaalisten, tuotteiden hintaan. Tutkimuksen kohteena olleiden tuotteiden, Gefilus®-piimän ja -mehujen, hintatasoa pidettiin myös kalliina. Gefilus®-mehujen hintaa pidettiin yleisesti liian kalliina. Euron käyttöönotto aiheutti muutoksia vastaajien referenssihinnoissa. Euron käyttöönoton voitiin havaita vaikuttaneen kuluttajien hintakäsityksiin siten, että hinnat vaikuttivat aikaisempaa halvemmilta. Lisäksi euron käyttöönotto oli vaikeuttanut hintojen arviointia. Lähes kaikki vastaajat olivat sitä mieltä, että euron käyttöönoton jälkeen hinnat olivat nouseet. Euron käyttöönotto oli myös lisännyt pankkikortin käyttöä maksuvälineenä käteisen sijaan. Avainsanat: funktionaalinen elintarvike, terveysvaikutteinen elintarvike, hintakäsitys, referenssihinta, euro

Vapaa-ajan vieton luonnonvarojen kulutus

This thesis studies the use of natural resources for leisure time activities. The method used is Material Input per Service Unit (MIPS method). Leisure time has an increasing effect on the material flows of households, and that way has a bigger pressure on the environment. The most popular way of spending spare time in Finland is to watch TV and to listen to music or radio. Regardless of these, this thesis takes a closer look at boating, playing a musical instrument and visiting a theatre and tries to quantify their material flows. MIPS calculations of this thesis are case-studies and do not tell the whole truth about the hobbies. The aim was to have an overview about the magnitude of the activities. In the boating calculations, inside the system boundaries there are the boat itself, transport of the boat, outboard motor, gasoline consumption of the outboard motor, travelling to and from the harbour, and the harbour infrastructure. Calculations of playing a music instrument consider the instrument itself, music school and its maintenance, and travelling to the school. In the case of theatre the included things are theatre house and its maintenance, decor and costumes of the plays, transport of the decor, and travelling of the audience. The results of this thesis suggest that the biggest material flow of boating comes from travelling to and from the harbour and from the harbour infrastructure. The gasoline consumption of the outboard motor also makes a difference. One hour of boating with a rowing boat consumes 1 kg of abiotic materials. Boating with an outboard motorboat consumes astonishing 113 kg of abiotic resources. Visiting a music lesson for one hour consumes 9 kg of abiotic resources when travelling there by bus. One hour in a theatre play consumes 17 kg of abiotic materials when travelling by bus. Transport has a significant role on the resource consumption of leisure time activities.