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Sensitivity Of Farm Plans Under Risk‐Averse Behaviour: A Note On The Environmental Implications

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  • David R. Oglethorpe

Abstract

This study demonstrates that the intensity of farm‐level land use can be extremely sensitive to minor reductions in expected farm income when the risk‐averse farmer makes utility maximising decisions. The study uses directly elicited utility functions for farmers in the North of England in conjunction with MOTAD generated E, V frontiers. The results imply that instability encourages the use of less intensive farming methods and therefore could actually assist the achievement of environmental policy goals.

Suggested Citation

  • David R. Oglethorpe, 1995. "Sensitivity Of Farm Plans Under Risk‐Averse Behaviour: A Note On The Environmental Implications," Journal of Agricultural Economics, Wiley Blackwell, vol. 46(2), pages 227-232, May.
    • Handle: RePEc:bla:jageco:v:46:y:1995:i:2:p:227-232
    DOI: 10.1111/j.1477-9552.1995.tb00768.x
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    2. Mann, Michael L. & Kaufmann, Robert K. & Bauer, Dana & Gopal, Sucharita & Vera-Diaz, Maria Del Carmen & Nepstad, Daniel & Merry, Frank & Kallay, Jennifer & Amacher, Gregory S., 2010. "The economics of cropland conversion in Amazonia: The importance of agricultural rent," Ecological Economics, Elsevier, vol. 69(7), pages 1503-1509, May.
    3. Alexander, Peter & Moran, Dominic, 2013. "Impact of perennial energy crops income variability on the crop selection of risk averse farmers," Energy Policy, Elsevier, vol. 52(C), pages 587-596.
    4. Janssen, Sander & van Ittersum, Martin K., 2007. "Assessing farm innovations and responses to policies: A review of bio-economic farm models," Agricultural Systems, Elsevier, vol. 94(3), pages 622-636, June.
    5. Breen, James P. & Hennessy, Thia C. & Thorne, Fiona S., 2005. "The effect of decoupling on the decision to produce: An Irish case study," Food Policy, Elsevier, vol. 30(2), pages 129-144, April.
    6. Bacic, Ivan Luiz Zilli & Bregt, Arnold K. & Rossiter, David G., 2006. "A participatory approach for integrating risk assessment into rural decision-making: A case study in Santa Catarina, Brazil," Agricultural Systems, Elsevier, vol. 87(2), pages 229-244, February.
    7. Chongwoo Choe & Iain Fraser, 1999. "Compliance Monitoring and Agri‐Environmental Policy," Journal of Agricultural Economics, Wiley Blackwell, vol. 50(3), pages 468-487, September.
    8. Beal, Diana J., 1996. "Emerging Issues in Risk Management in Farm Firms," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 64(03), pages 1-12, December.
    9. Weldegebriel, Habtu T. & Gunn, George J. & Stott, Alistair W., "undated". "Winners and losers from Johne’s disease eradication from the Scottish dairy herd: a Markov-Chain simulation," 82nd Annual Conference, March 31 - April 2, 2008, Royal Agricultural College, Cirencester, UK 36872, Agricultural Economics Society.
    10. S. Martin & F. McLeay, 1998. "The Diversity of Farmers' Risk Management Strategies in a Deregulated New Zealand Environment," Journal of Agricultural Economics, Wiley Blackwell, vol. 49(2), pages 218-233, June.
    11. Dobbs, Thomas L., 2002. "Agricultural, Resource, And Ecological Economics With A "Multifunctionality" Perspective," Economics Staff Papers 32025, South Dakota State University, Department of Economics.
    12. Oglethorpe, David R. & Sanderson, Roy A., 1999. "An ecological-economic model for agri-environmental policy analysis," Ecological Economics, Elsevier, vol. 28(2), pages 245-266, February.

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