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Title:Oil price effects on land use competition: An empirical analysis PDF Logo
Authors:Diermeier, Matthias
Schmidt, Torsten
Issue Date:2012
Series/Report no.:Ruhr Economic Papers 340
Abstract:The increasing use of food commodities for biofuel production has substantial impact on prices and quantities of these and other food commodities. It is therefore likely that this trend also intensifies the competition for arable land. However, evidence for this hypothesis is generated by calibrated models while empirical evidence is rare. In this paper we analyze the effects of crude oil price and prices of input factors for biofuel production on prices, areas and quantities of selected food commodities empirically performing Granger causality and cointegration tests as well as calculating impulse response functions. On the world aggregated level we reveal that the crude petroleum price only Granger causes the price of maize and wheat but the area used for the production of maize, soybean oil, sugar and wheat. The effect on wheat indicates an indirect effect on land use. Moreover, the price index of fats and oils has a stronger effect on prices, areas and quantities of other food commodities. At the country level, we identify that for the U.S., the maize price is the key variable influencing area and quantity of cereals. Additionally, in Indonesia and Malaysia we find that the palm oil price has significant effects on the area and quantity of rice. Despite these positive effects of commodity prices on land use we find no evidence for direct land competition between oil crops and cereals.
Subjects:Biofuel
food commodity prices
crude oil price
Granger causality
cointegration
JEL:L71
Q11
Q42
C32
Persistent Identifier of the first edition:doi:10.4419/86788392
ISBN:978-3-86788-392-4
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des RWI
Ruhr Economic Papers, RWI

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