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On Production Function Estimation with Selectivity and Risk Considerations

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  • Koundouri, Phoebe
  • Nauges, Celine

Abstract

In the estimation of production functions, ignoring risk considerations can cause inefficient estimates, while biased parameter estimates arise in the presence of sample selection. In the presence of uncertainty and selection bias, the latter introduced by the endogeneity of qualitative characteristics of inputs in crop choice, we show that correcting for risk considerations (a la Just and Pope, 1978, 1979) but not selection bias, can produce incorrect inferences in terms of risk behavior. The arguments raised in this study have estimation and policy implications for stochastic production analysis applied to all goods whose qualitative characteristics can affect sample selection.

Suggested Citation

  • Koundouri, Phoebe & Nauges, Celine, 2005. "On Production Function Estimation with Selectivity and Risk Considerations," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 30(3), pages 1-12, December.
    • Handle: RePEc:ags:jlaare:30977
    DOI: 10.22004/ag.econ.30977
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    References listed on IDEAS

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    1. Koundouri, Phoebe, 2000. "Three approaches to measuring natural resource scarcity: theory and application to groundwater," MPRA Paper 38265, University Library of Munich, Germany.
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    1. Raghu, Prabhakaran T. & Erenstein, Olaf & Böber, Christian & Krishna, Vijesh V., 2015. "Adoption and Outcomes of Hybrid Maize in the Marginal Areas of India," Quarterly Journal of International Agriculture, Humboldt-Universitaat zu Berlin, vol. 54(2), pages 1-26, May.
    2. Khayyat, Nabaz T. & Heshmati, Almas, 2014. "Production Risk, Energy Use Efficiency and Productivity of Korean Industries," Working Paper Series in Economics and Institutions of Innovation 359, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    3. Antti Saastamoinen, 2015. "Heteroscedasticity Or Production Risk? A Synthetic View," Journal of Economic Surveys, Wiley Blackwell, vol. 29(3), pages 459-478, July.
    4. Abdulai, Awudu & Owusu, Victor & Bakang, John-Eudes A., 2011. "Adoption of safer irrigation technologies and cropping patterns: Evidence from Southern Ghana," Ecological Economics, Elsevier, vol. 70(7), pages 1415-1423, May.
    5. Santosh Poudel & Koji Kotani, 2013. "Climatic impacts on crop yield and its variability in Nepal: do they vary across seasons and altitudes?," Climatic Change, Springer, vol. 116(2), pages 327-355, January.
    6. Finger, Robert & Lazzarotto, Patrick & Calanca, Pierluigi, 2010. "Bio-economic assessment of climate change impacts on managed grassland production," Agricultural Systems, Elsevier, vol. 103(9), pages 666-674, November.
    7. Lence, Sergio H., 2008. "How Much Can We Learn About Producers' Utility Functions from Their Production Data?," 2008 Agricultural and Rural Finance Markets in Transition, September 25-26, 2008, Kansas City, Missouri 119534, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
    8. Samira Shayanmehr & Shida Rastegari Henneberry & Mahmood Sabouhi Sabouni & Naser Shahnoushi Foroushani, 2020. "Climate Change and Sustainability of Crop Yield in Dry Regions Food Insecurity," Sustainability, MDPI, vol. 12(23), pages 1-24, November.
    9. Do, Huu-Luat & Dang Thuy, Truong, 2022. "Productivity response and production risk: A study of mangrove forest effects in aquaculture in the Mekong River Delta," Ecological Economics, Elsevier, vol. 194(C).
    10. Zheng Li & Roderick M. Rejesus & Xiaoyong Zheng, 2021. "Nonparametric Estimation and Inference of Production Risk," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1857-1877, October.
    11. Krishna, Vijesh V. & Zilberman, David & Qaim, Matin, 2009. "Transgenic technology adoption and on-farm varietal diversity," 2009 Conference, August 16-22, 2009, Beijing, China 51750, International Association of Agricultural Economists.
    12. Niklas Möhring & Martina Bozzola & Stefan Hirsch & Robert Finger, 2020. "Are pesticides risk decreasing? The relevance of pesticide indicator choice in empirical analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 429-444, May.
    13. Krishna, Vijesh V. & Zilberman, David & Qaim, Matin, 2009. "GM Technology Adoption, Production Risk and On-farm Varietal Diversity," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49173, Agricultural and Applied Economics Association.
    14. Li, Zheng & Rejesus, Roderick M. & Zheng, Xiaoyong, 2018. "Nonparametric Estimation and Inference of Production Risk with Categorical Variables," 2018 Annual Meeting, August 5-7, Washington, D.C. 274400, Agricultural and Applied Economics Association.

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