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Farm household risk balancing: empirical evidence from Switzerland

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  • de Mey, Yann
  • Wauters, Erwin
  • Schmid, Dierk
  • Van Passel, Steven
  • Vancauteren, Mark
  • Lips, Markus

Abstract

This paper presents the first empirical evidence on household risk balancing behavior, i.e., strategic off-farm decisions in response to changes in expected business risk. Using Swiss FADN data, we estimate a fixed effects seemingly unrelated regression model to analyze how farm households jointly alter their levels of debt, off-farm income and consumption. Evidence suggests that in response to changes in expected business risk, farm households make strategic off-farm decisions. Our study demonstrates that part of the behavioral risk response of farm households is ignored when focusing solely on farm-level analyses and illustrates the relevance of the household risk balancing framework.

Suggested Citation

  • de Mey, Yann & Wauters, Erwin & Schmid, Dierk & Van Passel, Steven & Vancauteren, Mark & Lips, Markus, 2014. "Farm household risk balancing: empirical evidence from Switzerland," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182719, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae14:182719
    DOI: 10.22004/ag.econ.182719
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    2. Daniel Burkhard & Christian P. R. Schmid & Kaspar Wüthrich, 2019. "Financial incentives and physician prescription behavior: Evidence from dispensing regulations," Health Economics, John Wiley & Sons, Ltd., vol. 28(9), pages 1114-1129, September.
    3. Boncinelli, Fabio & Bartolini, Fabio & Casini, Leonardo, 2018. "Structural factors of labour allocation for farm diversification activities," Land Use Policy, Elsevier, vol. 71(C), pages 204-212.
    4. Aderajew, Tamirat S. & Du, Xiaoxue & Pennings, Joost M. E. & Trujillo-Barrera, Andres, 2020. "Farm-Level Risk-Balancing Behavior and the Role of Latent Heterogeneity," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 45(2), March.
    5. Pierre Chiaverina & Sophie Drogué & Florence Jacquet & Larry Lev & Robert King, 2023. "Does short food supply chain participation improve farm economic performance? A meta‐analysis," Agricultural Economics, International Association of Agricultural Economists, vol. 54(3), pages 400-413, May.
    6. Komarek, Adam M. & De Pinto, Alessandro & Smith, Vincent H., 2020. "A review of types of risks in agriculture: What we know and what we need to know," Agricultural Systems, Elsevier, vol. 178(C).
    7. Thomas Slijper & Yann de Mey & P Marijn Poortvliet & Miranda P M Meuwissen, 2022. "Quantifying the resilience of European farms using FADN," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 49(1), pages 121-150.
    8. Mauro Vigani & Jonas Kathage, 2019. "To Risk or Not to Risk? Risk Management and Farm Productivity," American Journal of Agricultural Economics, John Wiley & Sons, vol. 101(5), pages 1432-1454, October.
    9. Adhikari, Sudip & Khanal, Aditya R., 2020. "Does higher business risk influence financial risk and induce savings among small agricultural operations? Findings from Tennessee," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304509, Agricultural and Applied Economics Association.
    10. Sarker, Rakhal, 2021. "Farm Safety Net Payments and Risk Balancing in Ontario Beef Sector," 2021 Conference, August 17-31, 2021, Virtual 315321, International Association of Agricultural Economists.
    11. Möhring, Niklas & Dalhaus, Tobias & Enjolras, Geoffroy & Finger, Robert, 2020. "Crop insurance and pesticide use in European agriculture," Agricultural Systems, Elsevier, vol. 184(C).
    12. Rakhal Sarker & Truc Phan & Yu Na Lee & Alfons Weersink, 2022. "Business Risk Management Program and risk‐balancing in Ontario hog sector: An empirical analysis," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 70(4), pages 287-304, December.
    13. Stefanos A. Nastis & Konstadinos Mattas & George Baourakis, 2019. "Understanding Farmers’ Behavior towards Sustainable Practices and Their Perceptions of Risk," Sustainability, MDPI, vol. 11(5), pages 1-13, March.
    14. Mishenin, Yevhen & Marekha, Iryna & Yarova, Inessa & Kovalova, Olha & Pizniak, Tetiana, 2022. "Optimizing a portfolio of agri-environmental investments," Agricultural and Resource Economics: International Scientific E-Journal, Agricultural and Resource Economics: International Scientific E-Journal, vol. 8(1), March.

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    Keywords

    Farm Management; Risk and Uncertainty;

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