TESTS FOR THE ROLE OF RISK AVERSION ON INPUT USE

Jutta Roosen and David Hennessy

No 20498, 2001 Annual meeting, August 5-8, Chicago, IL from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Agricultural inputs can create negative externalities. For risk averting agents, risk will alter production decisions while the existence of institutions to insure against adverse states of nature will likely restore decisions toward levels under risk neutrality. In this paper, conditions are identified on a stochastic technology to test that risk averters choose smaller input levels than risk neutral agents, and that an increase in risk aversion reduces input use. A robust statistical method (Klecan, McFadden, and McFadden) to test for dominance is adapted to stochastic production relations. It is found that the first hypothesis is likely true for nitrogen application on Iowa corn. Weaker evidence is found in favor of the second hypothesis.

Keywords: Farm Management; Risk and Uncertainty (search for similar items in EconPapers)
Pages: 25
Date: 2001
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Citations: View citations in EconPapers (6)

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Related works:
Journal Article: Tests for the Role of Risk Aversion on Input Use (2003)
Working Paper: Tests for the Role of Risk Aversion on Input Use (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea01:20498

DOI: 10.22004/ag.econ.20498

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