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Production risk, risk aversion and the determination of risk attitudes among Spanish rice producers

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  • Andrés J. Picazo‐Tadeo
  • Alan Wall

Abstract

Agricultural production is subject to risk and the attitudes of producers toward risk will influence input choices insofar as these affect production risk. Risk attitudes in turn may be affected by certain socioeconomic characteristics of producers. Using 2004 survey data from a cross‐section of 130 Spanish rice farms, we estimate risk‐aversion coefficients of farmers and investigate the influence of a series of socioeconomic variables on their risk attitudes. Our results show that farmers exhibit risk‐averse behavior and that risk attitudes are related to a series of socioeconomic characteristics. In particular, the belief that the farm will continue after the producer retires is found to increase the degree of risk aversion, while age is found to have nonlinear effects on risk aversion. Off‐farm income, especially from nonagricultural activities, is found to reduce risk aversion. Neither the educational level of the producer nor the presence of dependents on the household is found to have an effect on risk preferences. Regarding the production technology, we find that land, labor, and fitosanitary products are risk‐reducing inputs, whereas capital, seeds, and fertilizer all increase risk.

Suggested Citation

  • Andrés J. Picazo‐Tadeo & Alan Wall, 2011. "Production risk, risk aversion and the determination of risk attitudes among Spanish rice producers," Agricultural Economics, International Association of Agricultural Economists, vol. 42(4), pages 451-464, July.
  • Handle: RePEc:bla:agecon:v:42:y:2011:i:4:p:451-464
    DOI: 10.1111/j.1574-0862.2011.00537.x
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    File URL: https://doi.org/10.1111/j.1574-0862.2011.00537.x
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    Cited by:

    1. Jason R.V. Franken & Joost M.E. Pennings & Philip Garcia, 2017. "Risk attitudes and the structure of decision†making: evidence from the Illinois hog industry," Agricultural Economics, International Association of Agricultural Economists, vol. 48(1), pages 41-50, January.
    2. Edward Knapp & Jason Loughrey, 2017. "The single farm payment and income risk in Irish farms 2005–2013," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 5(1), pages 1-15, December.
    3. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Are farmers in low-rainfall cropping regions under-fertilizing? An Australian case-study," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 124976, International Association of Agricultural Economists.
    4. Inmaculada Rodríguez-Puerta & Alberto Álvarez-López, 2016. "Optimal allocation of a fixed production under price uncertainty," Annals of Operations Research, Springer, vol. 237(1), pages 121-142, February.
    5. Monjardino, M. & McBeath, T. & Ouzman, J. & Llewellyn, R. & Jones, B., 2015. "Farmer risk-aversion limits closure of yield and profit gaps: A study of nitrogen management in the southern Australian wheatbelt," Agricultural Systems, Elsevier, vol. 137(C), pages 108-118.
    6. Donoso, Guillermo, 2014. "A decision framework for a farmer who is risk averse in the Arrow-Pratt sense and downside risk averse," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 14(02), pages 1-22, December.
    7. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2013. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Matter? Evidence from Rural Uganda," GlobalFood Discussion Papers 158146, Georg-August-Universitaet Goettingen, GlobalFood, Department of Agricultural Economics and Rural Development.
    8. Simone Cerroni, 2020. "Eliciting farmers’ subjective probabilities, risk, and uncertainty preferences using contextualized field experiments," Agricultural Economics, International Association of Agricultural Economists, vol. 51(5), pages 707-724, September.
    9. Shuoli Zhao & Chengyan Yue, 2020. "Risk preferences of commodity crop producers and specialty crop producers: An application of prospect theory," Agricultural Economics, International Association of Agricultural Economists, vol. 51(3), pages 359-372, May.
    10. ODOZI, JOHN CHIWUZULUM & Adeniyi, Oluwaosin & Yusuf, Sulaiman A., 2018. "Production Efficiency in Small Agriculture: Do Migrant Remittances Matter?Evidence from Rural Nigeria," AgriXiv jfvzn, Center for Open Science.
    11. Monjardino, Marta & McBeath, T. & Brennan, Lisa E. & Llewellyn, Rick S., 2012. "Revisiting N fertilisation rates in low-rainfall grain cropping regions of Australia: A risk analysis," 2012 Conference (56th), February 7-10, 2012, Fremantle, Australia 124339, Australian Agricultural and Resource Economics Society.
    12. Inmaculada Rodríguez-Puerta & Alberto A. Álvarez-López, 2016. "Optimal allocation of a fixed production under price uncertainty," Annals of Operations Research, Springer, vol. 237(1), pages 121-142, February.
    13. Lyman, Nathaniel & Nalley, Lawton Lanier, 2013. "Stochastic Valuation of Hybrid Rice Technology in Arkansas," 2013 Annual Meeting, February 2-5, 2013, Orlando, Florida 142505, Southern Agricultural Economics Association.
    14. Wencong Lu & Abdul Latif & Raza Ullah, 2017. "Simultaneous adoption of contract farming and off-farm diversification for managing agricultural risks: the case of flue-cured Virginia tobacco in Pakistan," Natural Hazards: Journal of the International Society for the Prevention and Mitigation of Natural Hazards, Springer;International Society for the Prevention and Mitigation of Natural Hazards, vol. 86(3), pages 1347-1361, April.

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