Agricultural Economics

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The research group at the Institue of Economics of Hungarian Academy of Sciences analyse economic problems related to food, agriculture, and issues of rural areas, with an emphasis on policy issues. More specifically, our research focus on the development of the agricultural and rural sectors in both Hungarian and other Central and East European countries, with special emphasis on changes caused by transition and the EU enlargement. Current research areas are follow.

a. International agricultural trade
The research analyses the international agricultural trade employing the new theoretical and empirical developments in international trade. Our research focus mainly on the agricultural trade of the European Union. We investigate the effects governmental intervention on the pattern of agricultural trade. In other words, how to distort the agricultural policy interventions and trade policy measures the international agri-food trade. We also analyse the bilateral trade flows and their explanatory factors among EU countries and outside of the EU using various theoretical and empirical approaches.

b. Vertical co-ordination in agri-food sectors
This research deal with the horizontal and vertical cooperation within various agricultural chain in Hungary. In transition countries public institutions are ineffective in ensuring contract enforcement. The absence of enforceable contract and trust to set up any kind of vertical co-ordination becomes extremely difficult. Therefore, searching new partners for long run, relation-specific investments have been associated with high transaction costs for farmers. In addition, this creates severe barriers for price discovery involving high transaction costs to co-ordinate market exchanges. The agri-food chains are analysed for performance, including economic (e.g. costs, margins), technical (e.g. information acquisition and exchange) and social (e.g. trust, power) aspects employing different theoretical and empirical methods.

c. The analysis of agricultural prices and markets
European integration influences agricultural production and prices in the EU accession countries. Although there is much research about various aspects of this process, such as competitiveness, structural change, etc, analyses focusing on agricultural price transmission have attracted only scant resources. Moreover, these analyses often provide controversial results. In the research, we deal with the question of how the European integration process in Hungary has affected agricultural price transmission, which determines how the overall benefits are distributed along the various agri-food chain (beef, milk, pork). In addition, the analysis helps to identify the extent to which consumers benefit from productivity increases in agricultural production and processing or other price-reducing mechanisms. Furthermore, it provides information about the extent and the significance of restraints to competition and their impact on price margins. Finally, we also analyse the 'law of one price', i.e. the horizontal integration of the cereal markets The research focus not only on agricultural markets in Hungary (milk, pork, cereals), but we conduct comparative analyses with corresponding French and German markets.

d. The Influence of Macroeconomic Variables on the Agriculture in Transition Countries
The agricultural economics literature has emphasised the importance of macroeconomics and financial factors in the determination of agricultural prices already in the second half of eighties. Recently there has been renewed interest in the analysis of impact of monetary variables for agricultural prices Previous empirical research based on mainly U.S. agriculture suggests that any changes in macroeconomic variables should have an impact on agricultural prices, farm incomes and agricultural exports. Surprisingly, the interest has been scarce in Central-Eastern Europe, although it is reasonable to assume that due to less stable macroeconomic environment in a transition country these effects are more profound. Therefore, the aim of the research is to fill this gap that is to investigate the impacts of monetary policy variables on agricultural prices and food prices in transition countries employing modern time series approaches.

e. Rural Development
The LEADER Programme within the CAP has become an important contributor to EU rural policies during the last decade, and is gaining further importance as the Union grows. The LEADER method typically results in diverse, 'anarchic-type', locally-specific achievements. They are difficult to manage and evaluate through traditional central instruments, or to transfer and adapt to the socio-economic environment in different locations. There also are problems with the building, legitimacy, and accountability of local partnerships and their corresponding development agencies. These difficulties still cause malfunctions in the EU15, and are likely to gravely hinder implementation in the New Member States, where there is little or no precedent for such policies or institutions. The main research questions are following:

• How can integrated rural development be helped (or hindered) by the centre; and how LEADER can fulfil its proposed role in a New Member State?
• What sort of institutions (local, regional, central) and development methods are needed to realise integrated rural development? And what special (political, economic, social) circumstances may help/hinder this approach in Hungary?
• What consequences can be predicted based on the Hungarian experiences with LEADER? And what are the foreseeable, medium to long-term socioeconomic and political effects?
• How can these impacts be accurately evaluated (beyond traditional, quantitative, 'official' indicators) to include the assessment of synergistic and qualitative effects? How can the new, qualitative evaluation methodology of the EU be adapted to the Hungary?
• How can be the knowledge being transferred, and effectively employed for establishing EU rural development policies in the New Member States?