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Uncertainty, Risk Aversion, and Risk Management for Agricultural Producers

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  • Moschini, GianCarlo
  • Hennessy, David A.

Abstract

Uncertainty and risk are quintessential features of agricultural production. After a brief overview of the main sources of agricultural risk, we provide an exposition of expected utility theory and of the notion of risk aversion. This is followed by a basic analysis of agricultural production decisions under risk, including some comparative statics results from stylized models. Selected empirical topics are surveyed, with emphasis on risk analyses as they pertain to production decisions at the farm level. Risk management is then discussed, and a synthesis of hedging models is presented. We conclude with a detailed review of agricultural insurance, with emphasis on the moral hazard and adverse selection problems that arise in the context of crop insurance.
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Suggested Citation

  • Moschini, GianCarlo & Hennessy, David A., 2001. "Uncertainty, Risk Aversion, and Risk Management for Agricultural Producers," Staff General Research Papers Archive 5323, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:5323
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    References listed on IDEAS

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    1. Moschini, GianCarlo & LAPAN, HARVEY E, 1997. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," ISU General Staff Papers 199703010800001286, Iowa State University, Department of Economics.
    2. Spencer, Barbara J. & Jones, Ronald W., 1992. "Trade and protection in vertically related markets," Journal of International Economics, Elsevier, pages 31-55.
    3. Rausser, Gordon C. & Scotchmer, Suzanne & Simon, Leo K., 1999. "Intellectual Property and Market Structure in Agriculture," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt70j206tr, Department of Agricultural & Resource Economics, UC Berkeley.
    4. Giancarlo Moschini & Harvey Lapan & Andrei Sobolevsky, 2000. "Roundup ready® soybeans and welfare effects in the soybean complex," Agribusiness, John Wiley & Sons, Ltd., vol. 16(1), pages 33-55.
    5. Spencer, Barbara J. & Jones, Ronald W., 1992. "Trade and protection in vertically related markets," Journal of International Economics, Elsevier, pages 31-55.
    6. Stanley M. Besen & Leo J. Raskind, 1991. "An Introduction to the Law and Economics of Intellectual Property," Journal of Economic Perspectives, American Economic Association, pages 3-27.
    7. Kenneth Arrow, 1962. "Economic Welfare and the Allocation of Resources for Invention," NBER Chapters,in: The Rate and Direction of Inventive Activity: Economic and Social Factors, pages 609-626 National Bureau of Economic Research, Inc.
    8. Lapan, Harvey E & Moschini, Giancarlo, 2000. "Incomplete Adoption of a Superior Innovation," Economica, London School of Economics and Political Science, vol. 67(268), pages 525-542, November.
    9. Giancarlo Moschini & Harvey Lapan, 1997. "Intellectual Property Rights and the Welfare Effects of Agricultural R&D," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1229-1242.
    10. Carlson, Gerald A. & Marra, Michele C. & Hubbell, Bryan J., 1997. "Transgenic Technology for Crop Protection: The New "Super Seeds"," Choices, Agricultural and Applied Economics Association, vol. 12(3).
    11. Reinganum, Jennifer F., 1989. "The timing of innovation: Research, development, and diffusion," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 14, pages 849-908 Elsevier.
    12. William H. Meyers & S. Devadoss & Michael D. Helmar, 1991. "World Soybean Trade Model: Specification, Estimation, and Validation, The," Food and Agricultural Policy Research Institute (FAPRI) Publications 91-tr23, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    13. Maredia, Mywish K. & Ward, Richard & Byerlee, Derek, 1996. "Econometric estimation of a global spillover matrix for wheat varietal technology," Agricultural Economics, Blackwell, pages 159-173.
    14. William H. Meyers & S. Devadoss & Michael D. Helmar, 1991. "World Soybean Trade Model: Specification, Estimation, and Validation, The," Center for Agricultural and Rural Development (CARD) Publications 91-tr23, Center for Agricultural and Rural Development (CARD) at Iowa State University.
    15. Maredia, Mywish K. & Ward, Richard & Byerlee, Derek, 1996. "Econometric estimation of a global spillover matrix for wheat varietal technology," Agricultural Economics, Blackwell, pages 159-173.
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    JEL classification:

    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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