IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this book chapter or follow this series

Risk Response in Agriculture

In: The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies

  • Jeffrey LaFrance
  • Rulon Pope
  • Jesse Tack

Crop production is subject to supply shocks, and both expected and realized outputs as well as output prices are unknown when inputs are chosen. The process by which producers form expectations is difficult to model, especially when working with aggregate data. We present a necessary and sufficient condition on cost and technology to allow variable input demand equations to be specified as functions of input prices, quasi-fixed inputs, and total variable cost. These all are observable when inputs are committed to production, so that ex ante demands can be estimated with observable data. A flexible, exactly aggregable, and economically regular model of variable input demands is derived and applied to aggregate U.S. agricultural data for the period 1960-1999. We use the empirical results of this model to aid in the specification of a dynamic life-cycle model for agricultural producers facing output and output price risk, with investment in an off-farm, conditionally risk free asset, risky financial assets, savings, consumption, and agricultural production opportunities. This framework admits a coherent, structural, econometric model of input use, output production, savings, investment, and consumption for agricul-ture. We apply this model to U.S. data for the period 1960-1999. Ongoing work focuses on updating the data set to the 21st century and applying both components of the model at the state-level.

(This abstract was borrowed from another version of this item.)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.nber.org/chapters/c12108.pdf
Download Restriction: no

as
in new window

This chapter was published in:
  • Joshua S. Graff Zivin & Jeffrey M. Perloff, 2012. "The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies," NBER Books, National Bureau of Economic Research, Inc, number perl10-1, October.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12108.
    Handle: RePEc:nbr:nberch:12108
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
    Phone: 617-868-3900
    Web page: http://www.nber.org
    Email:


    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Jeffrey T. LaFrance & Timothy K. Beatty & Rulon D. Pope, 2006. "Gorman Engel Curves for Incomplete Demand Systems," Monash Economics Working Papers archive-23, Monash University, Department of Economics.
    2. Diewert, Walter E & Wales, Terence J, 1987. "Flexible Functional Forms and Global Curvature Conditions," Econometrica, Econometric Society, vol. 55(1), pages 43-68, January.
    3. Jorgenson, Dale W & Lau, Lawrence J & Stoker, Thomas M, 1980. "Welfare Comparison under Exact Aggregation," American Economic Review, American Economic Association, vol. 70(2), pages 268-72, May.
    4. Chambers,Robert G. & Quiggin,John, 2000. "Uncertainty, Production, Choice, and Agency," Cambridge Books, Cambridge University Press, number 9780521622448.
    5. Bruce A. Babcock & David A. Hennessy, 1996. "Input Demand under Yield and Revenue Insurance," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 416-427.
    6. Russell, Thomas, 1983. "On a theorem of Gorman," Economics Letters, Elsevier, vol. 11(3), pages 223-224.
    7. JunJie Wu, 1999. "Crop Insurance, Acreage Decisions, and Nonpoint-Source Pollution," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(2), pages 305-320.
    8. V. Eldon Ball & Charles Hallahan & Richard Nehring, 2004. "Convergence of Productivity: An Analysis of the Catch-up Hypothesis within a Panel of States," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(5), pages 1315-1321.
    9. Jeffrey LaFrance & Rulon Pope, 2008. "Duality Theory for Variable Costs in Joint Production," Working Papers 2009-02, School of Economic Sciences, Washington State University.
    10. Lau, Lawrence J, 1972. "Profit Functions of Technologies with Multiple Inputs and Outputs," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 281-89, August.
    11. Wales, T. J. & Woodland, A. D., 1983. "Estimation of consumer demand systems with binding non-negativity constraints," Journal of Econometrics, Elsevier, vol. 21(3), pages 263-285, April.
    12. Russell, Thomas & Farris, Frank, 1993. "The geometric structure of some systems of demand equations," Journal of Mathematical Economics, Elsevier, vol. 22(4), pages 309-325.
    13. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
    14. Rulon D. Pope & Jeffrey T. LaFrance & Richard E. Just, 2007. "Imperfect Price Deflation in Production Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 738-754.
    15. Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May.
    16. Lopez, Ramon E, 1985. "Structural Implications of a Class of Flexible Functional Forms for Profit Functions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 593-601, October.
    17. Just, Richard E. & Calvin, Linda & Quiggin, John, 1993. "Adverse Selection in Crop Insurance: Actuarial and Asymmetric Information Incentives," Working Papers 197809, University of Maryland, Department of Agricultural and Resource Economics.
    18. Vincent H. Smith & Barry K. Goodwin, 1996. "Crop Insurance, Moral Hazard, and Agricultural Chemical Use," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 428-438.
    19. Michael Jerison, 1993. "Russell on Gorman's Engel Curves: A Correction," Discussion Papers 93-05, University at Albany, SUNY, Department of Economics.
    20. Keith R. McLaren & K.K. Gary Wong, 2007. "Effective global regularity and empirical modeling of direct, inverse and mixed demand systems," Monash Econometrics and Business Statistics Working Papers 2/07, Monash University, Department of Econometrics and Business Statistics.
    21. Huizinga, John, 1993. "Inflation Uncertainty, Relative Price Uncertainty, and Investment in U.S. Manufacturing," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(3), pages 521-49, August.
    22. LaFrance, J. T. & Beatty, T. K. M. & Pope, R. D. & Agnew, G. K., 2002. "Information theoretic measures of the income distribution in food demand," Journal of Econometrics, Elsevier, vol. 107(1-2), pages 235-257, March.
    23. Hausman, Jerry A, 1981. "Exact Consumer's Surplus and Deadweight Loss," American Economic Review, American Economic Association, vol. 71(4), pages 662-76, September.
    24. Jeffrey T. LaFrance & Rulon D. Pope, 2008. "Homogeneity and Supply," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 606-612.
    25. Quiggin, John, 1992. "Some observations on insurance, bankruptcy and input demand," Journal of Economic Behavior & Organization, Elsevier, vol. 18(1), pages 101-110, June.
    26. Eldon V. Ball & Ricardo Cavazos & Jeffrey T. LaFrance & Rulon Pope & Jesse Tack, 2010. "Aggregation and Arbitrage in Joint Production," Monash Economics Working Papers archive-22, Monash University, Department of Economics.
    27. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1975. "Transcendental Logarithmic Utility Functions," American Economic Review, American Economic Association, vol. 65(3), pages 367-83, June.
    28. Hall, Robert E, 1973. "The Specification of Technology with Several Kinds of Output," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 878-92, July-Aug..
    29. LaFrance, Jeffrey T., 2004. "Integrability of the linear approximate almost ideal demand system," Economics Letters, Elsevier, vol. 84(3), pages 297-303, September.
    30. Jean-Paul Chavas, 2008. "A Cost Approach to Economic Analysis Under State-Contingent Production Uncertainty," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(2), pages 435-466.
    31. Rothschild, Michael & Stiglitz, Joseph E, 1976. "Equilibrium in Competitive Insurance Markets: An Essay on the Economics of Imperfect Information," The Quarterly Journal of Economics, MIT Press, vol. 90(4), pages 630-49, November.
    32. Harwood, Joy L. & Heifner, Richard G. & Coble, Keith H. & Perry, Janet E. & Somwaru, Agapi, 1999. "Managing Risk in Farming: Concepts, Research, and Analysis," Agricultural Economics Reports 34081, United States Department of Agriculture, Economic Research Service.
    33. Jorgenson, Dale W & Slesnick, Daniel T, 1984. "Aggregate Consumer Behaviour and the Measurement of Inequality," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 369-92, July.
    34. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, vol. 82(1), pages 15-33, March.
    35. Howe, Howard & Pollak, Robert A & Wales, Terence J, 1979. "Theory and Time Series Estimation of the Quadratic Expenditure System," Econometrica, Econometric Society, vol. 47(5), pages 1231-47, September.
    36. Blackorby, Charles & Primont, Daniel & Robert Russell, R., 1977. "Dual price and quantity aggregation," Journal of Economic Theory, Elsevier, vol. 14(1), pages 130-148, February.
    37. John Huizinga, 1993. "Inflation uncertainty, relative price uncertainty, and investment in U.S. manufacturing," Proceedings, Federal Reserve Bank of Cleveland, pages 521-557.
    38. J. K. Horowitz & E. Lichtenberg, 1994. "Risk-Reducing And Risk-Increasing Effects Of Pesticides," Journal of Agricultural Economics, Wiley Blackwell, vol. 45(1), pages 82-89.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:nbr:nberch:12108. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.