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Tests for the Role of Risk Aversion on Input Use

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  • Jutta Roosen
  • David A. Hennessy

Abstract

For risk-averting agents, risks alter production decisions while the existence of institutions to insure against adverse states of nature will likely restore decisions toward levels under risk neutrality. In this article, conditions are identified on a stochastic technology to test H rn 0,≤ : that risk averters choose smaller input levels than risk neutral agents, and H ra 0,≤ : that an increase in risk aversion reduces input use. A robust statistical method to test for dominance is adapted to stochastic production relations. It is found that H rn 0,≤ is likely true for nitrogen application on Iowa corn. Weaker evidence is found in favor of H ra 0,≤ . Copyright 2003, Oxford University Press.

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Bibliographic Info

Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 85 (2003)
Issue (Month): 1 ()
Pages: 30-43

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Handle: RePEc:oup:ajagec:v:85:y:2003:i:1:p:30-43

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Cited by:
  1. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Are farmers in low-rainfall cropping regions under-fertilizing? An Australian case-study," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 124976, International Association of Agricultural Economists.
  2. Williamson, James M., 2010. "Does Information Matter? Assessing the Role of Information and Prices in the Nitrogen Fertilizer Management Decision," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60892, Agricultural and Applied Economics Association.
  3. Hennessy, David A., 2012. "Modeling Stochastic Crop Yield Expectations with a Limiting Beta Distribution," Staff General Research Papers 35020, Iowa State University, Department of Economics.
  4. Meyer-Aurich, Andreas & Gandorfer, Markus & Rajsic, Predrag, 2013. "Analyzing higher moments of nitrogen response for risk efficient fertilizer application in wheat and corn production," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150220, Agricultural and Applied Economics Association.
  5. Howard, Gregory E. & Roe, Brian E., 2011. "Comparing the Risk Attitudes of U.S. and German Farmers," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114528, European Association of Agricultural Economists.
  6. Hailu, Getu & Jeffrey, Scott R. & Goddard, Ellen W., 2004. "Impact Of Decision Makers Divergence In Risk Attitudes And Perceptions On Co-Operative Management In Canada," 2004 Annual meeting, August 1-4, Denver, CO 20246, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  7. Gandorfer, Markus & Pannell, David & Meyer-Aurich, Andreas, 2011. "Analyzing the effects of risk and uncertainty on optimal tillage and nitrogen fertilizer intensity for field crops in Germany," Agricultural Systems, Elsevier, vol. 104(8), pages 615-622, October.
  8. Kalogeras, Nikos & Pennings, Joost M.E. & Garcia, Philip, 2006. "What Drives Strategic Behavior? A Framework to Explain and Predict SMEs' Transition to Sustainable Production Systems," 2006 Annual meeting, July 23-26, Long Beach, CA 21354, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Athey, Susan, 2002. "Monotone Comparative Statics Under Uncertainty," Scholarly Articles 3372263, Harvard University Department of Economics.
  10. Liu, Yucan & Shumway, C. Richard, 2005. "Indirect Utility Maximization under Risk: A Heterogeneous Panel Application," 2005 Annual Meeting, July 6-8, 2005, San Francisco, California 36307, Western Agricultural Economics Association.
  11. Bokusheva, Raushan & Breustedt, Gunnar & Heidelbach, Olaf, 2006. "Measurement and Comparison of Risk Reduction by Means of Farm Yield, Area Yield, and Weather Index Crop Insurance Schemes - The Case of Kazakhstani Wheat Farms," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25523, International Association of Agricultural Economists.
  12. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Revisiting N fertilisation rates in low-rainfall grain cropping regions of Australia: A risk analysis," 2012 Conference (56th), February 7-10, 2012, Freemantle, Australia 124339, Australian Agricultural and Resource Economics Society.

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