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The predictive power of risk preference measures for farming decisions

Permanent URL:
http://handle.nal.usda.gov/10113/58051
File:
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Abstract:
This paper uses a lottery-choice mechanism to measure farmer preferences over money-denominated risks. We look at the ability of these choice data to predict farming decisions for an in-person sample of 68 farmers. A coarse version of our risk preference measure has substantial explanatory power but in an unexpected direction: a farmer who was more risk averse under our measure was less likely to have diversified his operation and less likely to have a crop insurance contract. A fine version of our risk preference measure has essentially no explanatory power. We conclude that despite their widespread use in the lab, lottery-choice measures of risk preferences are unproven for predicting real world farming behaviour.
Author(s):
Daniel Hellerstein , Nathaniel Higgins , John Horowitz
Subject(s):
crop insurance , decision making , farmers , farming systems , prediction , risk , sampling
Source:
European review of agricultural economics 2013 12 v.40 no.5
Language:
English
Year:
2013
Collection:
Journal Articles, USDA Authors, Peer-Reviewed
Rights:
Works produced by employees of the U.S. Government as part of their official duties are not copyrighted within the U.S. The content of this document is not copyrighted.