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Production risk in multi-output industries: estimates from Norwegian dairy farms

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  • Ragnar Tveteras
  • Ola Flaten
  • Gudbrand Lien
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    Abstract

    Farmers who produce multiple outputs are portfolio managers in the sense that they use inputs to balance expected economic return and variance of return. This article estimates the structure of the stochastic multioutput production technology in Norwegian dairy farming, allowing for a more flexible specification of the technology than previous studies. We find that an increase in input levels leads primarily to higher output variability, and that inputs also influence the covariance of shocks between outputs. Risk reducing effects of inputs on outputs are primarily present in the covariance functions. Technical change leads to shifts in the profit distribution over the data period, but no welfare improvement for risk averse farmers.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036846.2010.491461
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 43 (2011)
    Issue (Month): 28 ()
    Pages: 4403-4414

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    Handle: RePEc:taf:applec:v:43:y:2011:i:28:p:4403-4414

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    Cited by:
    1. 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.
    2. 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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