Back to Library

Uncertainty, risk aversion, and risk management for agricultural producers

Published by:
Document
Download
Publication date
26/06/2001
Number of Pages
67
Language:
English
Type of Publication:
Books
Focus Region:
Global
Focus Topic:
Capacity Development
Type of Risk:
Biological & environmental
Type of Risk Managment Option:
Risk assessment
Risk coping
Risk transfer
Commodity:
Crops
Author
Giancarlo Moschini, David A. Hennessy
Organization
Iowa State University

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.

Keywords: