Modelling Investment Optimization on Smallholder Farms through Multi-criteria Decision Approaches: An Example from Ethiopia
We use data from the Ethiopia Rural Household Survey and the Ethiopian Central Statistics Agency to demonstrate a set of techniques for estimating optimal investment allocation in smallholder farming. The approaches treat farming tasks, constraints, and investments as a portfolio problem, characterized by multiple competing objectives. We formulate several versions of the multi-objective problem and solve them in three alternative ways; 1) using standard Markowitz portfolio optimization, 2) using a weighted goal programming model, and 3) a multi-horizon mean variance goal programming model, estimating all model parameters using real data. The main benefit of the goal programming formulation is the possibility to simplify in a single criterion problem complex situations in which the Decision Maker (DM) faces a trade-off between two or more objectives. We discuss the importance of portfolio allocations for smallholder farmers in minimizing risk and increasing return, and discuss how these approaches provide a framework that can be extended to practical applications in smallholder farming.
|Date of creation:||2014|
|Contact details of provider:|| Postal: Manor Road, Oxford, OX1 3UQ|
Phone: +44-(0)1865 271084
Fax: +44-(0)1865 281447
Web page: http://www.csae.ox.ac.uk/
More information through EDIRC
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.:
- Belaid AOUNI & Cinzia COLAPINTO & Davide LA TORRE, 2008. "Solving stochastic multi-objective programming through the GP model," Departmental Working Papers 2008-18, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Luisa Menapace & Gregory Colson & Roberta Raffaelli, 2013. "Risk Aversion, Subjective Beliefs, and Farmer Risk Management Strategies," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 95(2), pages 384-389.
- Spielman, David J. & Mekonnen, Dawit Kelemework & Alemu, Dawit, 2012.
"Seed, fertilizer, and agricultural extension in Ethiopia,"
IFPRI book chapters,in: Food and agriculture in Ethiopia: Progress and policy challenges, chapter 4
International Food Policy Research Institute (IFPRI).
- Spielman, David J. & Kelemwork, Dawit & Alemu, Dawit, 2011. "Seed, fertilizer, and agricultural extension in Ethiopia:," ESSP working papers 20, International Food Policy Research Institute (IFPRI).
- Frank Ellis, 2000. "The Determinants of Rural Livelihood Diversification in Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 289-302.
- Stefano A. Caria & Paolo Falco, 2014. "Does the Risk of Poverty Reduce Happiness?," Development Working Papers 363, Centro Studi Luca d'Agliano, University of Milano, revised 07 Apr 2014.
- Mahmud Yesuf & Randall A. Bluffstone, 2009. "Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1022-1037.
- Belaïd Aouni & Cinzia Colapinto & Davide Torre, 2013. "A cardinality constrained stochastic goal programming model with satisfaction functions for venture capital investment decision making," Annals of Operations Research, Springer, vol. 205(1), pages 77-88, May. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:csa:wpaper:2014-06. 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: (Richard Payne)
If references are entirely missing, you can add them using this form.