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Uncertain Yields In Sectoral Welfare Analysis: An Application To Global Warming

Author

Listed:
  • Lambert, David K.
  • McCarl, Bruce A.
  • He, Quifen
  • Kaylen, Michael S.
  • Rosenthal, Wesley
  • Chang, Ching-Cheng
  • Nayda, W.I.

Abstract

Agriculture operates in an uncertain environment. Yields, prices, and resource usage can change dramatically from year to year. However, most analyses of the agricultural sector, at least those using mathematical programming methods, assume decision making is based on average yields, ignoring yield variability. This study examines how explicit consideration of stochastic yield outcomes influence a sector analysis. We develop a model that can be used for stochastic sector analysis. We extend the risk framework developed by Hazell and others to incorporate discrete yield outcomes as well as consumption activities dependent upon yield outcomes. An empirical application addresses a comparison between sector analysis with and without considerations of the economic effects of yield variability in a global warming context.

Suggested Citation

  • Lambert, David K. & McCarl, Bruce A. & He, Quifen & Kaylen, Michael S. & Rosenthal, Wesley & Chang, Ching-Cheng & Nayda, W.I., 1995. "Uncertain Yields In Sectoral Welfare Analysis: An Application To Global Warming," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 27(02), December.
  • Handle: RePEc:ags:joaaec:15257
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    References listed on IDEAS

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    1. Spreen, Thomas H., 2006. "Price Endogenous Mathematical Programming Models and Trade Analysis," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 38(02), August.
    2. Mark R. Weimar & Arne Hallam, 1988. "Risk, Diversification, and Vegetables as an Alternative Crop for Midwestern Agriculture," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 10(1), pages 75-89.
    3. McCarl, Bruce A. & Parandvash, Gholam Hossein, 1988. "Irrigation Development Versus Hydroelectric Generation: Can Interruptible Irrigation Play A Role?," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 13(02), December.
    4. Beach, Robert H. & Thomson, Allison M. & McCarl, Bruce A., 2010. "Climate Change Impacts On Us Agriculture," Proceedings Issues, 2010: Climate Change in World Agriculture: Mitigation, Adaptation, Trade and Food Security, June 2010, Stuttgart- Hohenheim, Germany 91393, International Agricultural Trade Research Consortium.
    5. Tobey, James A. & Reilly, John M. & Kane, Sally, 1992. "Economic Implications Of Global Climate Change For World Agriculture," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 17(01), July.
    6. Apland, Jeffrey & Hauer, Grant, 1993. "Discrete Stochastic Programming: Concepts, Examples And A Review Of Empirical Applications," Staff Papers 13793, University of Minnesota, Department of Applied Economics.
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    Cited by:

    1. Jones, Jason P.H. & McCarl, Bruce A., 2016. "Impacts of U.S. Production-Dependent Ethanol Policy on Agricultural Markets," 2016 Annual Meeting, July 31-August 2, 2016, Boston, Massachusetts 236258, Agricultural and Applied Economics Association.
    2. Choi, Hyung Sik & Schneider, Uwe A. & Rasche, Livia & Cui, Junbo & Schmid, Erwin & Held, Hermann, 2015. "Potential effects of perfect seasonal climate forecasting on agricultural markets, welfare and land use: A case study of Spain," Agricultural Systems, Elsevier, vol. 133(C), pages 177-189.
    3. Guan, Z. & Philpott, A.B., 2011. "A multistage stochastic programming model for the New Zealand dairy industry," International Journal of Production Economics, Elsevier, vol. 134(2), pages 289-299, December.
    4. Chen, Chi-Chung & McCarl, Bruce A., 2000. "The Value Of Enso Information To Agriculture: Consideration Of Event Strength And Trade," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 25(02), December.
    5. Butt, Tanveer A. & Mccarl, Bruce A., 2005. "An analytical framework for making long -term projections of undernourishment: A case study for agriculture in Mali," Food Policy, Elsevier, vol. 30(4), pages 434-451, August.

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