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Whole-farm planning under uncertainty: impacts of subsidy scheme and utility function on portfolio choice in Norwegian agriculture

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  • G Lien
  • JB Hardaker

Abstract

This paper addresses the impacts of degree of risk aversion, subsidy scheme and choice of utility function on optimal farm plans in Norwegian agriculture. Data from a farm business survey (1991-1997) are combined with subjective judgements to formulate a two-stage utility-efficient programming model. Under existing policy and market conditions, the ex ante expectation was that farmers' risk attitudes are unlikely to have a large effect on choice of enterprise mix. The results tend to confirm this view, and a farmer who is hardly risk averse at all would choose the same farm plan as a very risk averse farmer. Factors such as subsidy schemes, market conditions for the products and available labour on the farm are found to be more important determinants of the optimal plans than farmers' risk attitude or the form of the utility function. Copyright 2001, Oxford University Press.

Suggested Citation

  • G Lien & JB Hardaker, 2001. "Whole-farm planning under uncertainty: impacts of subsidy scheme and utility function on portfolio choice in Norwegian agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 28(1), pages 17-36, March.
  • Handle: RePEc:oup:erevae:v:28:y:2001:i:1:p:17-36
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