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|
|Date of revision:|
|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
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.:
- 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.
- 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.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Frank Ellis, 2000. "The Determinants of Rural Livelihood Diversification in Developing Countries," Journal of Agricultural Economics, Wiley Blackwell, vol. 51(2), pages 289-302.
- 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.
- 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.
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 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.