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Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility?

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Author Info
Lence, Sergio H.

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Abstract

A thought experiment is designed to investigate whether the structure of risk aversion (i.e., the changes in absolute or relative risk aversion associated with changes in wealth) can be estimated with reasonable precision from agricultural production data. Findings strongly suggest that typical production data are unlikely to allow identification of the structure of risk aversion. A flexible utility parameterization is found to slightly worsen technology parameter estimates. Results also indicate that even under a restricted utility specification, utility parameter estimates are biased. Further, their quality is much worse when shocks are not large or samples are small.

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Publisher Info
Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13028.

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Length: 43 pages
Date of creation: 03 Feb 2009
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Publication status: Forthcoming in American Journal of Agricultural Economics
Handle: RePEc:isu:genres:13028

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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Related research
Keywords: expected utility; joint estimation; production analysis; risk attitudes; risk preferences;

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Find related papers by JEL classification:
C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General
D2 - Microeconomics - - Production and Organizations
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture

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  1. Technology Assessment
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This page was last updated on 2009-11-9.

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