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Comparing the Use of Risk influencing Production Inputs and Experimentally Measured Risk Attitude: Do the Decisions of Indonesian Small scale Rubber Farmers Match?

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  • Moser, Stefan
  • Mußhoff, Oliver

Abstract

This article compares the use of risk-increasing and risk-reducing production inputs with the experimentally measured risk attitudes of farmers. For this purpose, a Just-Pope production function indicates production inputs’ influence on output risk, and a Holt-Laury lottery is used to measure farmers’ risk attitudes. We then test whether more risk averse farmers use more risk-reducing and less risk-increasing production inputs. To do so, a unique data set which includes 185 small-scale rubber farmers on the island of Sumatra, Indonesia, is used. The Just-Pope production function suggests that higher fertiliser usage has a risk-reducing effect, whereas higher herbicide usage has a risk-increasing effect. Comparing this with the outcome of a Holt-Laury lottery, we found that more risk averse farmers use more fertiliser (risk-reducing) and less herbicides (risk-increasing). The consistency of these results can be interpreted as reinforcing the external validity of measuring risk attitude with a Holt-Laury lottery.

Suggested Citation

  • Moser, Stefan & Mußhoff, Oliver, 2017. "Comparing the Use of Risk influencing Production Inputs and Experimentally Measured Risk Attitude: Do the Decisions of Indonesian Small scale Rubber Farmers Match?," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 66(2), June.
    • Handle: RePEc:ags:gjagec:303544
    DOI: 10.22004/ag.econ.303544
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    More about this item

    Keywords

    Farm Management; Institutional and Behavioral Economics; Production Economics; Productivity Analysis; Research Methods/ Statistical Methods; Risk and Uncertainty;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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