The regional specifity of structural change in agriculture: An assessment of the role of farmers’ strategic behaviour on the land market

Among the family-farms in western Germany, significant regional differences are observable. They exist not only with respect to present farm-structure but also with respect to patterns of structural change. In the present paper, the different farm-development-strategies that cause these regional patterns are explained economically. As a central cause for their stability in a competitive environment, the relatedness of agricultural production to the non-renewable factor land is identified. Moreover, the coordination of the different strategies, which results in regional clusters, is shown to evolve endogenously in a model of strategic interaction on the land-market. It is demonstrated that due to the existence of rents of the status quo and resulting non-linearity in farmers’ reaction-curves, coordination-failures and multiple equilibria are possible. The theoretically derived results confirm the notion that not only farmers’ decisions determine structural development but also the initial structural situation heavily influences upon farmers’ decisions. The interdependence between structure and behaviour is reinforced by the important role of expectation concerning competitors’ behaviour in strategic interaction, because these expectations are coined by experience