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Risk Response in Agriculture

Risk Response in Agriculture

(p.143) 5 Risk Response in Agriculture
The Intended and Unintended Effects of U.S. Agricultural and Biotechnology Policies
Jeffrey LaFranceRulon PopeJesse Tack
University of Chicago Press

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

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