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Technological Change And Risk Management: An Application To The Economics Of Corn Production

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  • Kim, Kwansoo
  • Chavas, Jean-Paul

Abstract

The paper investigates the linkages between technological change and production risk, with an application to corn. The effects of technology on risk exposure are characterized based on the properties of the risk premium. We define technological progress to be risk-increasing (risk-decreasing) if it increases (decreases) the relative risk premium. The analysis is applied to panel data from Wisconsin research stations. Conditional moments (including mean, variance and skewness) of corn yield, grain moisture and corn profit are estimated for different sites. We investigate how the trade-off between expected return and the risk premium varies over time and over space. The empirical results indicate that technological progress contributes to reducing the exposure to risk as well as downside risk in corn production, although this effect varies across sites. They also stress the role of the relative maturity of corn hybrid as a means of managing risk.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2001 Annual meeting, August 5-8, Chicago, IL with number 20605.

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Date of creation: 2001
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Handle: RePEc:ags:aaea01:20605

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Related research

Keywords: Crop Production/Industries; Research and Development/Tech Change/Emerging Technologies; Risk and Uncertainty;

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  1. Brennan, John P., 1984. "Measuring the Contribution of New Varieties to Increasing Wheat Yields," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 52(03), December.
  2. Hans Binswanger, 1981. "Attitudes toward risk: Theoretical implications of an experiment in rural india," Artefactual Field Experiments 00010, The Field Experiments Website.
  3. Octavio A. Ram�rez, 1997. "Estimation and Use of a Multivariate Parametric Model for Simulating Heteroskedastic, Correlated, Nonnormal Random Variables: The Case of Corn Belt Corn, Soybean, and Wheat Yields," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 191-205.
  4. Antle, John M, 1983. "Testing the Stochastic Structure of Production: A Flexible Moment-based Approach," Journal of Business & Economic Statistics, American Statistical Association, vol. 1(3), pages 192-201, July.
  5. Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May.
  6. Masters, William A. & Bedingar, Touba & Oehmke, James F., 1998. "The impact of agricultural research in Africa: aggregate and case study evidence," Agricultural Economics: The Journal of the International Association of Agricultural Economists, International Association of Agricultural Economists, vol. 19(1-2), September.
  7. Byerlee, Derek, 1996. "Modern varieties, productivity, and sustainability: Recent experience and emerging challenges," World Development, Elsevier, vol. 24(4), pages 697-718, April.
  8. V. Eldon Ball & Jean-Christophe Bureau & Richard Nehring & Agapi Somwaru, 1997. "Agricultural Productivity Revisited," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1045-1063.
  9. Taylor, C. Robert, 1984. "A Flexible Method For Empirically Estimating Probability Functions," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 9(01), July.
  10. Antle, John M & Crissman, Charles C, 1990. "Risk, Efficiency, and the Adoption of Modern Crop Varieties: Evidence from the Philippines," Economic Development and Cultural Change, University of Chicago Press, vol. 38(3), pages 517-37, April.
  11. Mendelsohn, Robert & Nordhaus, William D & Shaw, Daigee, 1994. "The Impact of Global Warming on Agriculture: A Ricardian Analysis," American Economic Review, American Economic Association, vol. 84(4), pages 753-71, September.
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