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Using Consumption and Asset Return Data to Estimate Farmersï¾’ Time Preferences and Risk Attitudes

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Author Info

  • Lence, Sergio H.

Abstract

The generalized expected utility model is fitted to U.S. farm data to estimate farm operator's time preferences and risk attitudes. The estimated farmer's utility parameters are quite "reasonable" and exhibit high accuracy. The forward-looking expected utility model is soundly rejected in favor of the generalized expected utility paradigm. Importantly, the generalized expected utility model is also found to fit the data better than the myopic model typically used to study agricultural production under risk. Finally, U.S. farmers' relative aversion to risk appears to have diminished significantly over time.

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Bibliographic Info

Paper provided by Iowa State University, Department of Economics in its series Staff General Research Papers with number 1930.

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Date of creation: 01 Nov 2000
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Publication status: Published in American Journal of Agricultural Economics, November 2000, vol. 82 no. 4, pp. 934-947
Handle: RePEc:isu:genres:1930

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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
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Web page: http://www.econ.iastate.edu
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Cited by:
  1. Xavier Vollenweider & Salvatore Di Falco & Cathal O’Donoghue, 2011. "Risk preferences and voluntary agrienvironmental schemes: does risk aversion explain the uptake of the Rural Environment Protection Scheme?," Grantham Research Institute on Climate Change and the Environment Working Papers, Grantham Research Institute on Climate Change and the Environment 48, Grantham Research Institute on Climate Change and the Environment.
  2. Livingston, Michael J. & Roberts, Michael J. & Rust, John, 2008. "Optimal Corn and Soybean Rotations," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 6213, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Hailu, Getu & Jeffrey, Scott R. & Goddard, Ellen W., 2004. "Impact Of Decision Makers Divergence In Risk Attitudes And Perceptions On Co-Operative Management In Canada," 2004 Annual meeting, August 1-4, Denver, CO, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 20246, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  4. Tveteras, Ragnar & Flaten, Ola & Lien, Gudbrand D., 2008. "Production risk in multi-output industries: estimates from Norwegian dairy farms," 2008 International Congress, August 26-29, 2008, Ghent, Belgium, European Association of Agricultural Economists 43958, European Association of Agricultural Economists.
  5. Johansson, Robert C. & Livingston, Michael J. & Westra, John V. & Guidry, Kurt M., 2006. "Simulating the U.S. Impacts of Alternative Asian Soybean Rust Treatment Regimes," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, Northeastern Agricultural and Resource Economics Association, vol. 35(1), April.
  6. Pope, Rulon D. & LaFrance, Jeffrey T. & Just, Richard E., 2011. "Agricultural arbitrage and risk preferences," Journal of Econometrics, Elsevier, Elsevier, vol. 162(1), pages 35-43, May.
  7. Teklewold, Hailemariam, 2011. "Farming or burning? shadow prices and farmer’s impatience on the allocation of multi-purpose resource in the mixed farming system of Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland, European Association of Agricultural Economists 116080, European Association of Agricultural Economists.
  8. Hardaker, J. Brian & Lien, Gudbrand, 2010. "Probabilities for decision analysis in agriculture and rural resource economics: The need for a paradigm change," Agricultural Systems, Elsevier, Elsevier, vol. 103(6), pages 345-350, July.
  9. Wang, H. Holly & Du, Wen, 2005. "Intertemporal Risk Management Decisions of Farmers under Preference, Market, and Policy Dynamics," 2005 Annual meeting, July 24-27, Providence, RI, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 19526, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  10. Mosnier, C. & Agabriel, J. & Lherm, M. & Reynaud, A., 2009. "A dynamic bio-economic model to simulate optimal adjustments of suckler cow farm management to production and market shocks in France," Agricultural Systems, Elsevier, Elsevier, vol. 102(1-3), pages 77-88, October.
  11. Anton, Jesus & Le Mouel, Chantal, 2003. "Do Counter-Cyclical Payments In The Fsri Act Create Incentives To Produce?," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa, International Association of Agricultural Economists 25811, International Association of Agricultural Economists.
  12. Myyrä, Sami, & Pietola, Kyosti & Heikkilä, Anna-Maija, 2011. "Farm Level Capital: Capital positions, structures, the dynamics of farm level investments, capital accumulation and leverage positions," Factor Markets Working Papers, Centre for European Policy Studies 105, Centre for European Policy Studies.
  13. Howitt, Richard E. & Reynaud, Arnaud & Msangi, Siwa & Knapp, Keith C., 2002. "Calibrated Stochastic Dynamic Models for Resource Management," 2002 Annual meeting, July 28-31, Long Beach, CA, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) 19620, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  14. Keith Coble & Jayson Lusk, 2010. "At the nexus of risk and time preferences: An experimental investigation," Journal of Risk and Uncertainty, Springer, Springer, vol. 41(1), pages 67-79, August.
  15. Frechette, Darren L. & Wen, Fang-I, 2002. "Risk Aversion, Uncertainty Aversion, And Variation Aversion In Applied Commodity Price Analysis," 2002 Conference, April 22-23, 2002, St. Louis, Missouri, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management 19062, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.

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