Risk attitudes and premiums of U.S. corn and soybean producers: An empirical investigation

Michael J. Livingston, Ashok K. Mishra

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

The 2000 Agricultural Risk Protection Act and 2002 Farm Security and Rural Investment Act reduced price and yield risks faced by many U.S. crop producers to low levels. We use a non-structural methodology extended for application to pseudo panels and national survey data to examine the risk attitudes of U.S. corn and soybean producers to test whether, and examine how, risk attitudes varied during the 1996-2001 and 2002-2008 periods by revenue category. We cannot reject the hypothesis of risk neutrality for the entire population, and for each revenue category, for the former period, but can reject risk neutrality, in favor of risk tolerance, for the entire population and for the larger revenue categories for the latter period. Estimated risk premiums for the latter period suggest that U.S. corn and soybean farmers who earn more require larger payments to remain indifferent between receiving their expected income with certainty and receiving an uncertain income from farming and government programs.

Original languageEnglish (US)
Pages (from-to)1337-1351
Number of pages15
JournalEmpirical Economics
Volume44
Issue number3
DOIs
StatePublished - Jun 1 2013
Externally publishedYes

Keywords

  • Agricultural Resource Management Survey
  • Coefficient of absolute downside risk aversion
  • Coefficient of absolute risk aversion
  • Coefficient of relative risk aversion
  • Government payments
  • Risk attitudes
  • Risk premiums

ASJC Scopus subject areas

  • Statistics and Probability
  • Mathematics (miscellaneous)
  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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