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Resource Management under Production and Output Price Uncertainty: Implications for Environmental Policy

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  • Murat Isik

Abstract

Various environmental policies have been proposed to control agricultural runoff of nutrients and pesticides. The impacts of these policies on input use are complicated because of the various sources of uncertainty farmers face and the precise nature of farmers' risk attitude. A risk-averse farmer's response to changed profit, input, and output taxes under output price and production uncertainty is examined. The impact of these policies on input use depends on the form of production uncertainty, risk-input relationships, risk attitudes, and degrees of output price and production uncertainty. These results have implications for the design and implementation of environmental and other production-related policies. Copyright 2002, Oxford University Press.

Suggested Citation

  • Murat Isik, 2002. "Resource Management under Production and Output Price Uncertainty: Implications for Environmental Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(3), pages 557-571.
  • Handle: RePEc:oup:ajagec:v:84:y:2002:i:3:p:557-571
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    File URL: http://hdl.handle.net/10.1111/1467-8276.00319
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    Cited by:

    1. Patterson, Jeffrey M. & Boisvert, Richard N., 2002. "An Incentive Compatible Self-Compliant Pollution Policy and Asymmetric Information on Both Risk Attitudes and Technology," Working Papers 127318, Cornell University, Department of Applied Economics and Management.
    2. Pokhrel, Deepak M. & Thapa, Gopal B., 2007. "Are marketing intermediaries exploiting mountain farmers in Nepal? A study based on market price, marketing margin and income distribution analyses," Agricultural Systems, Elsevier, vol. 94(2), pages 151-164, May.
    3. El Benni, Nadja & Finger, Robert & Mann, Stefan, 2012. "The effect of agricultural policy change on income risk in Swiss agriculture," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122532, European Association of Agricultural Economists.
    4. Apland, Jeffrey & Grainger, Corbett & Strock, Jeffrey, 2004. "Modeling Agricultural Production Considering Water Quality and Risk," Staff Papers 14240, University of Minnesota, Department of Applied Economics.
    5. Erwin Schmid & Franz Sinabell, 2004. "On the Choice of Farm Management Practices after the Reform of the Common Agricultural Policy in 2003," WIFO Working Papers 233, WIFO.
    6. Ozanne, Adam & White, Benedict, 2008. "Hidden action, risk aversion and variable fines in agri-environmental schemes," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(2), June.
    7. Boisvert, Richard N. & Chang, Hung-Hao, 2006. "Does Participation in the Conservation Reserve Program and Off-Farm Work Affect the Level and Distribution of Farm Household Incomes?," 2006 Annual meeting, July 23-26, Long Beach, CA 21277, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Asci, Serhat & Borisova, Tatiana & VanSickle, John J. & Zotarelli, Lincoln, 2012. "Risk and Nitrogen Application Decisions in Florida Potato Production," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119797, Southern Agricultural Economics Association.
    9. Jones, Ashley D. & Dalton, Timothy J. & Smale, Melinda, 2012. "A Stochastic Production Function Analysis of Maize Hybrids and Yield Variability in Drought-Prone Areas of Kenya," Working Papers 202593, Egerton University, Tegemeo Institute of Agricultural Policy and Development.
    10. Bontems, Philippe & Nauges, Céline, 2017. "Production choices with water markets: The role of initial allocations and forward trading," TSE Working Papers 17-812, Toulouse School of Economics (TSE).
    11. Yano, Yuki & Blandford, David, 2008. "Agri-Environmental Policy and Moral Hazard under Output Price and Production Uncertainty," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44323, European Association of Agricultural Economists.
    12. Kaitibie, Simeon & Nganje, William E. & Brorsen, B. Wade & Epplin, Francis M., 2003. "Optimal Grazing Pressure Under Output Price And Production Uncertainty With Alternative Functional Forms," 2003 Annual meeting, July 27-30, Montreal, Canada 22020, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    13. Bougherara, Douadia & Nauges, Céline, 2018. "How laboratory experiments could help disentangle the influences of production risk and risk preferences on input decisions," TSE Working Papers 18-903, Toulouse School of Economics (TSE).
    14. Murat Isik & Madhu Khanna, 2003. "Stochastic Technology, Risk Preferences, and Adoption of Site-Specific Technologies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 85(2), pages 305-317.
    15. Finger, Robert, 2011. "Reductions of Agricultural Nitrogen Use Under Consideration of Production and Price Risks," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114356, European Association of Agricultural Economists.
    16. Xavier Vollenweider & Salvatore Di Falco & Cathal O�Donoghue, 2011. "Risk preferences and voluntary agrienvironmental schemes: does risk aversion explain the uptake of the Rural Environment Protection Scheme?," GRI Working Papers 48, Grantham Research Institute on Climate Change and the Environment.
    17. Drichoutis, Andreas C. & Koundouri, Phoebe, 2012. "Estimating risk attitudes in conventional and artefactual lab experiments: The importance of the underlying assumptions," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 6, pages 1-15.
    18. Asci, Serhat & Borisova, Tatiana & VanSickle, John J., 2014. "Risks in Potato Production: Fertilizer, Water, and Producers’ Decision Making," 2014 Annual Meeting, February 1-4, 2014, Dallas, Texas 162536, Southern Agricultural Economics Association.
    19. Agabriel, Jacques & Lherm, Michel & Mosnier, Claire & Reynaud, Arnaud & Thomas, Alban, 2009. "Estimating a Production Function under Production and Output Price Risks: An Application to Beef Cattle in France," TSE Working Papers 09-046, Toulouse School of Economics (TSE).
    20. Salimonu, Kabir K. & Falusi, Abiodun O., 2007. "Risk Preferences And Resource Allocation Differentials Of Food Crop Farmers," Journal of Rural Economics and Development, University of Ibadan, Department of Agricultural Economics, vol. 16.
    21. Isik, Murat, 2003. "Environmental Regulation And The Optimal Location Of The Firm Under Uncertainty," 2003 Annual meeting, July 27-30, Montreal, Canada 22066, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    22. Boisvert, Richard N. & Chang, Hung-Hao, 2005. "Explaining Participation in the Conservation Reserve Program and its Effects on Farm Productivity and Efficiency," 2005 Annual meeting, July 24-27, Providence, RI 19321, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    23. Isik, Murat, 2005. "A Theoretical and Empirical Analysis of Conservation Reserve Program Participation under Uncertainty," 2005 Annual meeting, July 24-27, Providence, RI 19264, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    24. Picazo-Tadeo, Andres J. & Reig-Martinez, Ernest, 2007. "Farmers' costs of environmental regulation: Reducing the consumption of nitrogen in citrus farming," Economic Modelling, Elsevier, vol. 24(2), pages 312-328, March.
    25. Finger, Robert, 2012. "Nitrogen use and the effects of nitrogen taxation under consideration of production and price risks," Agricultural Systems, Elsevier, vol. 107(C), pages 13-20.

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