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Technological Change And Risk Management: An Application To The Economics Of Corn Production

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  • Kim, Kwansoo
  • Chavas, Jean-Paul

Abstract

The paper investigates the linkages between technological change and production risk, with an application to corn. The effects of technology on risk exposure are characterized based on the properties of the risk premium. We define technological progress to be risk-increasing (risk-decreasing) if it increases (decreases) the relative risk premium. The analysis is applied to panel data from Wisconsin research stations. Conditional moments (including mean, variance and skewness) of corn yield, grain moisture and corn profit are estimated for different sites. We investigate how the trade-off between expected return and the risk premium varies over time and over space. The empirical results indicate that technological progress contributes to reducing the exposure to risk as well as downside risk in corn production, although this effect varies across sites. They also stress the role of the relative maturity of corn hybrid as a means of managing risk.

Suggested Citation

  • Kim, Kwansoo & Chavas, Jean-Paul, 2001. "Technological Change And Risk Management: An Application To The Economics Of Corn Production," 2001 Annual meeting, August 5-8, Chicago, IL 20605, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  • Handle: RePEc:ags:aaea01:20605
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    References listed on IDEAS

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    More about this item

    Keywords

    Crop Production/Industries; Research and Development/Tech Change/Emerging Technologies; Risk and Uncertainty;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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