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How can allocative inefficiency reveal risk preference? An empirical investigation on French wheat farms

Author

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  • Blancard, Stephane
  • Boussemart, Jean-Philippe
  • Crainich, D.
  • Leleu, Herve
Abstract
We focus on a simple framework on wheat producer behaviour in a context of price output uncertainty. More precisely, we establish a relationship between ex post output price level and allocative inefficiency that allows to characterize farmers’ risk preferences. Given this analysis, the connection between risk aversion and other socioeconomic variables (such as degree of output specialisation, total asset, debts, farmer’s age…) can furthermore empirically be explored. This relationship is empirically tested on an unbalanced panel including about 650 wheat producers located in the French Department of Meuse over 1992- 2003.

Suggested Citation

  • Blancard, Stephane & Boussemart, Jean-Philippe & Crainich, D. & Leleu, Herve, 2008. "How can allocative inefficiency reveal risk preference? An empirical investigation on French wheat farms," 2008 International Congress, August 26-29, 2008, Ghent, Belgium 44208, European Association of Agricultural Economists.
    • Handle: RePEc:ags:eaae08:44208
    DOI: 10.22004/ag.econ.44208
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    References listed on IDEAS

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    1. Wu, Craig C, 1979. "Price-Output Uncertainty and Allocative Efficiency: An Empirical Study of Small-Scale Farms," The Review of Economics and Statistics, MIT Press, vol. 61(2), pages 228-233, May.
    2. Moschini, Giancarlo & Hennessy, David A., 2001. "Uncertainty, risk aversion, and risk management for agricultural producers," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 1, chapter 2, pages 88-153, Elsevier.
    3. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    4. Subal C. Kumbhakar, 2002. "Risk preference and productivity measurement under output price uncertainty," Empirical Economics, Springer, vol. 27(3), pages 461-472.
    5. Robert G. Chambers & John Quiggin, 2002. "The State-Contingent Properties of Stochastic Production Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(2), pages 513-526.
    6. Just, Richard E. & Pope, Rulon D., 1978. "Stochastic specification of production functions and economic implications," Journal of Econometrics, Elsevier, vol. 7(1), pages 67-86, February.
    7. Sandmo, Agnar, 1971. "On the Theory of the Competitive Firm under Price Uncertainty," American Economic Review, American Economic Association, vol. 61(1), pages 65-73, March.
    8. W. Briec, 1997. "A Graph-Type Extension of Farrell Technical Efficiency Measure," Journal of Productivity Analysis, Springer, vol. 8(1), pages 95-110, March.
    9. repec:feb:artefa:0008 is not listed on IDEAS
    10. Chambers, Robert G. & Chung, Yangho & Fare, Rolf, 1996. "Benefit and Distance Functions," Journal of Economic Theory, Elsevier, vol. 70(2), pages 407-419, August.
    11. Edgardo Moscardi & Alain de Janvry, 1977. "Attitudes Toward Risk Among Peasants: An Econometric Approach," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 59(4), pages 710-716.
    12. Chambers, Robert G, 1983. "Scale and Productivity Measurement under Risk," American Economic Review, American Economic Association, vol. 73(4), pages 802-805, September.
    13. Shahabuddin, Quazi & Mestelman, Stuart & Feeny, David, 1986. "Peasant Behaviour towards Risk and Socio-Economic and Structural Characteristics of Farm Households in Bangladesh," Oxford Economic Papers, Oxford University Press, vol. 38(1), pages 122-130, March.
    14. R. G. Chambers & Y. Chung & R. Färe, 1998. "Profit, Directional Distance Functions, and Nerlovian Efficiency," Journal of Optimization Theory and Applications, Springer, vol. 98(2), pages 351-364, August.
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    Cited by:

    1. Elie Appelbaum & Aman Ullah, 1997. "Estimation Of Moments And Production Decisions Under Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 79(4), pages 631-637, November.
    2. Appelbaum, E., 1989. "Uncertainty And The Measurement Of Productivity," Papers 89-05, York (Canada) - Department of Economics.

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    More about this item

    Keywords

    Crop Production/Industries; Risk and Uncertainty;

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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