Epsilon Archive for Student Projects

Abstract

Apples are an appealing healthy fruit, and, in this thesis, their price is investigated as a function of various factors. The main question pursued is how spring frost and economic dynamics interact with apple prices. Firstly, I examine spring frost and its possible correlation with farm-gate price, since frost during apple tree blossoming impacts apple development. This is done with Ordinary Least Squares (OLS). Secondly, supply and demand mechanisms are explored to further examine the potential relationship between weather and price. This is done using 2-Stage Least Squares (2SLS) regression, with price as the dependent variable, quantity as the independent variable, and spring frost as an instrumental variable. Both OLS and 2SLS models indicate a correlation between spring frost and price. Lastly, I develop a time-series model with lagged dependent variables in order to understand price behaviour, using price and quantity produced as endogenous variables, along with production costs (oil prices), macroeconomic indicators (GDP per capita, exchange rates, interest rates), and weather (spring frost) as exogenous variables. This model further supports the association between spring frost and prices. With these results, I contribute to agricultural economics research by discussing the economic effects of spring frost and highlighting possible interpretations of the developed time-series model.