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Risk attitudes and premiums of U.S. corn and soybean producers: an empirical investigation

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  • Michael Livingston
  • Ashok Mishra

Abstract

The 2000 Agricultural Risk Protection Act and 2002 Farm Security and Rural Investment Act reduced price and yield risks faced by many U.S. crop producers to low levels. We use a non-structural methodology extended for application to pseudo panels and national survey data to examine the risk attitudes of U.S. corn and soybean producers to test whether, and examine how, risk attitudes varied during the 1996–2001 and 2002–2008 periods by revenue category. We cannot reject the hypothesis of risk neutrality for the entire population, and for each revenue category, for the former period, but can reject risk neutrality, in favor of risk tolerance, for the entire population and for the larger revenue categories for the latter period. Estimated risk premiums for the latter period suggest that U.S. corn and soybean farmers who earn more require larger payments to remain indifferent between receiving their expected income with certainty and receiving an uncertain income from farming and government programs. Copyright Springer-Verlag 2013

Suggested Citation

  • Michael Livingston & Ashok Mishra, 2013. "Risk attitudes and premiums of U.S. corn and soybean producers: an empirical investigation," Empirical Economics, Springer, vol. 44(3), pages 1337-1351, June.
    • Handle: RePEc:spr:empeco:v:44:y:2013:i:3:p:1337-1351
    DOI: 10.1007/s00181-012-0580-6
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Risk attitudes; Risk premiums; Coefficient of absolute risk aversion; Coefficient of absolute downside risk aversion; Coefficient of relative risk aversion; Government payments; Agricultural Resource Management Survey; Q12; Q15; Q18;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy

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