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Editor's choice Rice, irrigation and downside risk: a quantile analysis of risk exposure and mitigation on Korean farms

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  • Kwansoo Kim
  • Jean-Paul Chavas
  • Bradford Barham
  • Jeremy Foltz

Abstract

This article develops a quantile moment approach to evaluate risk exposure and to illustrate risk valuation, and then applies it to examine the relative importance of downside risk and risk mitigation options associated with a highly controlled but stochastic production system on Korean farms. The econometric approach exploits a rich panel dataset to develop consistent and robust econometric estimates of the quantile moments needed to decompose and analyse risk outcomes. The results show that about 90 per cent of the cost of risk on Korean farms comes from exposure to downside risk. We also examine how management factors can help to mitigate risk exposure outcomes.

Suggested Citation

  • Kwansoo Kim & Jean-Paul Chavas & Bradford Barham & Jeremy Foltz, 2014. "Editor's choice Rice, irrigation and downside risk: a quantile analysis of risk exposure and mitigation on Korean farms," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 41(5), pages 775-815.
    • Handle: RePEc:oup:erevae:v:41:y:2014:i:5:p:775-815.
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    File URL: http://hdl.handle.net/10.1093/erae/jbt041
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    Cited by:

    1. Jaleta, Moti & Merenya, Paswel & Beshir, Bedru & Erenstein, Olaf, 2020. "Does crop diversification reduce downside risk of external maize yield-enhancing technology? Evidence from Ethiopia," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 15(2), June.
    2. Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2015. "Expossure To Risk And Risk Management In Smallholder Agriculture," 55th Annual Conference, Giessen, Germany, September 23-25, 2015 209211, German Association of Agricultural Economists (GEWISOLA).
    3. 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).
    4. Li, Man & Xu, Wenchao & Rosegrant, Mark W., 2016. "Irrigation, Risk Aversion, and Water Rights under Water Supply Uncertainty," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235753, Agricultural and Applied Economics Association.
    5. Catarina Roseta‐Palma & Yiğit Sağlam, 2019. "Downside risk in reservoir management," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 63(2), pages 328-353, April.
    6. Zewdu Ayalew Abro & Moti Jaleta & Hailemariam Teklewold, 2018. "Does Intensive Tillage Enhance Productivity and Reduce Risk Exposure? Panel Data Evidence from Smallholders’ Agriculture in Ethiopia," Journal of Agricultural Economics, Wiley Blackwell, vol. 69(3), pages 756-776, September.
    7. Philippe Bontems & Celine Nauges, 2018. "Production choices with water markets and risk aversion: the role of initial allocations and forward trading," Post-Print hal-02349932, HAL.
    8. Fengxia Dong, 2022. "Cover Crops, Drought, Yield, and Risk: An Analysis of US Soybean Production," NBER Chapters, in: American Agriculture, Water Resources, and Climate Change, pages 241-267, National Bureau of Economic Research, Inc.
    9. Menale Kassie & Hailemariam Teklewold & Paswel Marenya & Moti Jaleta & Olaf Erenstein, 2015. "Production Risks and Food Security under Alternative Technology Choices in Malawi: Application of a Multinomial Endogenous Switching Regression," Journal of Agricultural Economics, Wiley Blackwell, vol. 66(3), pages 640-659, September.
    10. Robert Finger & Carola Grebitus & Arne Henningsen, 2023. "Replications in agricultural economics," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1258-1274, September.
    11. Marianne Lefebvre & Estelle Midler & Philippe Bontems, 2020. "Adoption of Environment-Friendly Agricultural Practices with Background Risk: Experimental Evidence," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(2), pages 405-428, July.
    12. Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2016. "Cost of Risk Exposure, Farm Disinvestment and Adaptation to Climate Uncertainties: The Case of Arable Farms in the EU," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235595, Agricultural and Applied Economics Association.
    13. Lefebvre, Marianne & Midler, Estelle & Bontems, Philippe, 2020. "Adoption of environmentally-friendly agricultural practices with background risk: experimental evidence," TSE Working Papers 20-1079, Toulouse School of Economics (TSE).
    14. Luigi Biagini & Simone Severini, 2022. "How Does the Farmer Strike a Balance between Income and Risk across Inputs? An Application in Italian Field Crop Farms," Sustainability, MDPI, vol. 14(23), pages 1-15, December.
    15. Kedar Kulkarni & David Rossi, 2023. "Determinants of downside risk exposure: An analysis of Korean rice farms using partial and quantile moments," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 45(3), pages 1356-1373, September.
    16. Jikun Huang & Yangjie Wang & Jinxia Wang, 2015. "Farmers' Adaptation to Extreme Weather Events through Farm Management and Its Impacts on the Mean and Risk of Rice Yield in China," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 602-617.
    17. Jaleta, M. & Marenya, P. & Beshir, B., 2018. "Does crop diversification reduce downside risk in maize yield enhancing investments? Evidence from Ethiopia using panel data," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277217, International Association of Agricultural Economists.
    18. Tobias Dalhaus & Barry J Barnett & Robert Finger, 2020. "Behavioral weather insurance: Applying cumulative prospect theory to agricultural insurance design under narrow framing," PLOS ONE, Public Library of Science, vol. 15(5), pages 1-25, May.

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