Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility?
AbstractA 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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Bibliographic InfoPaper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 13028.
Date of creation: 05 Aug 2009
Date of revision:
Publication status: Published in American Journal of Agricultural Economics, August 2009, vol. 91 no. 3, pp. 581-598
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
Phone: +1 515.294.6741
Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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expected utility; joint estimation; production analysis; risk attitudes; risk preferences;
Other versions of this item:
- Sergio H. Lence, 2007. "Joint Estimation of Risk Preferences and Technology: Flexible Utility or Futility?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 581-598.
- Lence, Sergio H., 2007. "Joint Estimation of Risk Preferences and Technology: Flexible Utility of Futility?," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 9980, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- D20 - Microeconomics - - Production and Organizations - - - General
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
This paper has been announced in the following NEP Reports:
- NEP-AGR-2009-02-14 (Agricultural Economics)
- NEP-ALL-2009-02-14 (All new papers)
- NEP-UPT-2009-02-14 (Utility Models & Prospect Theory)
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