Chapter

Risk Response in Agriculture

Jeffrey LaFrance, Rulon Pope and Jesse Tack

in The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies

Published by University of Chicago Press

Published in print March 2012 | ISBN: 9780226988030
Published online February 2013 | e-ISBN: 9780226988061 | DOI: http://dx.doi.org/10.7208/chicago/9780226988061.003.0006
Risk Response in Agriculture

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This chapter develops and analyzes a new structural model of variable input use, production, acreage allocations, capital investment, and consumption choices in the U.S. farm sector. The theoretical framework identifies and incorporates the restrictions that are necessary and sufficient to estimate variable input use using only observable data and to aggregate from micro units of behavior to county-, state-, region-, or country-levels of data and analyses. The chapter defines, specifies, and estimates a dynamic life-cycle model of decision making under risk in order to discipline the model and associated parameter estimates for risk aversion in agricultural production and investment decisions with the interactions that naturally occur among the available alternative investment and savings opportunities in the economy.

Keywords: Federal Agricultural Improvement and Reform Act; Federal Crop Insurance Corporation; risk management; crop revenue; consumer price index; risk response; agriculture

Chapter.  14233 words. 

Subjects: Economic Development and Growth

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