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Soil Depletion Choices under Production and Price Uncertainty

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    Abstract

    This paper studies soil depletion incentives in a dynamic economic model under two different sources of revenue uncertainty (production- and output price risk). The focus is on the long-term effects of risk averse preferences. The land manager is assumed to posses three classes of instruments to control natural topsoil fertility over time. Each instrument is also assumed to have implications for expected short-run production. The analysis shows that the forces at play are different across the three agricultural activities considered and varies for the two sources of risk analysed. In order to predict how risk aversion may influence soil conservation incentives detailed information is needed about input use and cultivation practices and the farmers' perception of their risk implications. If higher output is associated with higher levels of soil degradation, risk averse preferences will strengthen the incentives for soil conservation under output price uncertainty, and the same outcome is likely under production uncertainty. If higher levels of outputs is associated with lower levels of soil degradation, risk averse preferences will induce a farmer to conserve less soil under output price uncertainty, while the likely outcome of production uncertainty is the opposite

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    File URL: http://www.ssb.no/a/publikasjoner/pdf/DP/dp186.pdf
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    Bibliographic Info

    Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 186.

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    Date of creation: Jan 1997
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    Handle: RePEc:ssb:dispap:186

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    Keywords: Risk aversion; farm behaviour; resource management.;

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    1. Annegrete Bruvoll & Solveig Glomsrød & Haakon Vennemo, 1995. "The environmental drag on long- term economic performance: Evidence from Norway," Discussion Papers 143, Research Department of Statistics Norway.
    2. Steinar Holden & Dag Kolsrud & Birger Vikøren, 1995. "Noisy signals in target zone regimes Theory and Monte Carlo experiments," Discussion Papers 160, Research Department of Statistics Norway.
    3. Ray Barrell & Knut A. Magnussen, 1996. "Counterfactual Analyses of Oil Price Shocks using a World Model," Discussion Papers 177, Research Department of Statistics Norway.
    4. Jørgen Aasness & Erik Biørn & Terje Skjerpen, 1995. "Distribution of Preferences and Measurement Errors in a Disaggregated Expenditure System+," Discussion Papers 149, Research Department of Statistics Norway.
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    8. Aasness, Jorgen & Bye, Torstein & Mysen, Hans Terje, 1996. "Welfare effects of emission taxes in Norway," Energy Economics, Elsevier, vol. 18(4), pages 335-346, October.
    9. Asheim, G.B. & Brekke, K.A., 1993. "Sustainability when Resource Management has Stochastic Consequences," Papers 01-93, Norwegian School of Economics and Business Administration-.
    10. Rolf Aaberge & Anders Björklund & Markus Jäntti & Mårten Palme & Peder J. Pedersen & Nina Smith & Tom Wennemo, 1996. "Income Inequality and Income Mobility in the Scandinavian Countries Compared to the United States," Discussion Papers 168, Research Department of Statistics Norway.
    11. Elin Berg & Snorre Kverndokk & Knut Einar Rosendahl, 1996. "Gains from Cartelisation in the Oil Market," Discussion Papers 181, Research Department of Statistics Norway.
    12. Hoel, Michael & Kverndokk, Snorre, 1996. "Depletion of fossil fuels and the impacts of global warming," Resource and Energy Economics, Elsevier, vol. 18(2), pages 115-136, June.
    13. Rolf Aaberge & Ugo Colombino & Steinar Strøm, 1996. "Welfare Effects of Proportional Taxation: Empirical Evidence from Italy, Norway and Sweden," Discussion Papers 171, Research Department of Statistics Norway.
    14. Karl Ove Aarbu, 1995. "Some Issues About the Norwegian Capital Income Imputation Model," Discussion Papers 155, Research Department of Statistics Norway.
    15. John K. Dagsvik & Dag G. Wetterwald & Rolf Aaberge, 1996. "Potential Demand for Alternative Fuel Vehicles," Discussion Papers 165, Research Department of Statistics Norway.
    16. Annegrete Bruvoll & Karin Ibenholt, 1996. "Future Waste Generation - Forecasts Based on a Macroeconomic Model," Discussion Papers 175, Research Department of Statistics Norway.
    17. Einar Bowitz & Taran Fæhn & Leo A. Grünfeld & Knut Moum, 1995. "Transitory Adjustment Costs and Long Term Welfare Effects of an EU-membership - The Norwegian Case," Discussion Papers 150, Research Department of Statistics Norway.
    18. Pål Boug & Knut Anton Mork & Trond Tjemsland, 1995. "Financial Deregulation and Consumer Behavior: the Norwegian Experience," Discussion Papers 156, Research Department of Statistics Norway.
    19. Elin Berg & Snorre Kverndokk & Knut Einar Rosendahl, 1996. "Market Power, International CO2 Taxation and Petroleum Wealth," Discussion Papers 170, Research Department of Statistics Norway.
    20. Rolf Aaberge, 1995. "Choosing Measures of Inequality for Empirical Applications," Discussion Papers 158, Research Department of Statistics Norway.
    21. Bye, Brita, 2002. "Taxation, Unemployment, and Growth: Dynamic Welfare Effects of "Green" Policies," Journal of Environmental Economics and Management, Elsevier, vol. 43(1), pages 1-19, January.
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