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Risk preference and productivity measurement under output price uncertainty

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  • Subal C. Kumbhakar

    ()
    (Department of Economics, State University of New York, Binghamton, NY 13902, USA)

Abstract

This paper deals with joint estimation of production and risk preference functions in the presence of output price uncertainty. We use quadratic production and utility functions under the assumption that producers maximize expected utility of anticipated profit. A panel data on Norwegian salmon farms is used for this purpose. Empirical results show that all salmon farmers are risk averse. Relative risk premium (the implicit cost of private risk bearing) is found to be about 15% of mean profit. We also find rapid technological change taking place (3.75% per year) in the salmon farming industry.

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Bibliographic Info

Article provided by Springer in its journal Empirical Economics.

Volume (Year): 27 (2002)
Issue (Month): 3 ()
Pages: 461-472

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Handle: RePEc:spr:empeco:v:27:y:2002:i:3:p:461-472

Note: received: February 2000/Final version received: February 2001
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Related research

Keywords: Production function · risk averse · risk premium · salmon farming;

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Cited by:
  1. Elie Appelbaum & Alan D. Woodland, 2008. "The Effects of Foreign Price Uncertainty on Australian Production and Trade," Working Papers 2008_03, York University, Department of Economics.
  2. Xavier Vollenweider & Salvatore Di Falco & Cathal O’Donoghue, 2011. "Risk preferences and voluntary agri-environmental schemes: does risk aversion explain the uptake of the Rural Environment Protection Scheme?," LSE Research Online Documents on Economics 37585, London School of Economics and Political Science, LSE Library.
  3. Ndoye Niane, Aifa Fatimata & Burger, Kees, 2012. "Gender and Experimental Measurement of Producers Risk Attitude Towards Output Market Price and its Effects on Economic Performance," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126928, International Association of Agricultural Economists.
  4. Blancard, Stephane & Boussemart, Jean-Philippe & Crainich, D. & Leleu, Herve, 2008. "How can allocative inefficiency reveal risk preference? An empirical investigation on French wheat farms," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44208, European Association of Agricultural Economists.
  5. Alghalith Moawia, 2005. "Hedging under price and output uncertainty: estimation methodology," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(5), pages 309-312, September.
  6. Koundouri, Phoebe & Laukkanen, Marita, 2004. "Stochastic Production in a Regulated Fishery:The Importance of Risk Considerations," MPRA Paper 41912, University Library of Munich, Germany.
  7. Khayyat, Nabaz T. & Heshmati, Almas, 2014. "Production Risk, Energy Use Efficiency and Productivity of Korean Industries," IZA Discussion Papers 8081, Institute for the Study of Labor (IZA).
  8. Jean-Philippe Boussemart & Walter Briec & Christophe Tavera, 2007. "More evidence on technological catching-up in the manufacturing sector," Working Papers 2007-ECO-02, IESEG School of Management.
  9. Jean-Philippe Boussemart & David Crainich & Hervé Leleu, 2012. "A decomposition of profit inefficiency into price expectation error, preferences towards risk and technical inefficiency," Working Papers 2012-ECO-04, IESEG School of Management.
  10. Ceddia, M.G. & Heikkil, J. & Peltola, J., 2009. "Managing invasive alien species with professional and hobby farmers: Insights from ecological-economic modelling," Ecological Economics, Elsevier, vol. 68(5), pages 1366-1374, March.
  11. Tomasz Gerard Czekaj & Arne Henningsen, 2013. "Panel Data Nonparametric Estimation of Production Risk and Risk Preferences: An Application to Polish Dairy Farms," IFRO Working Paper 2013/6, University of Copenhagen, Department of Food and Resource Economics.

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