Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match?

Stefan Moser and Oliver Musshoff

No 14, EFForTS Discussion Paper Series from University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)"

Abstract: This article compares the use of risk-increasing and risk-reducing production inputs with the experimentally measured risk attitudes of farmers. For this purpose, the Just-Pope production function indicates production inputs' influence on output risk and a Holt-Laury lottery is used to measure the producer´s risk attitude. We test whether more risk averse farmers use more risk-reducing and less risk-increasing production inputs. Therefore, we apply a unique data set which includes 185 small-scale farmers which are producing rubber on 260 plots on the island of Sumatra, Indonesia. The Just-Pope production function indicates that fertiliser usage has a risk-reducing effect, whereas herbicide usage and plot size have risk-increasing effects. For labour and plantation age, the influence on output risk is ambiguous. By including the outcome of a Holt-Laury lottery into the analysis, we found the expected result that more risk averse farmers use more (risk-reducing) fertiliser and less (risk-increasing) herbicides. These consistent results provide an example for the external validity of measuring risk attitude with the Holt-Laury lottery.

Keywords: Holt-Laury lottery; Just-Pope production function; output risk; rubber; Indonesia (search for similar items in EconPapers)
JEL-codes: C91 C93 Q12 (search for similar items in EconPapers)
Date: 2015
New Economics Papers: this item is included in nep-agr, nep-eff and nep-sea
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https://www.econstor.eu/bitstream/10419/117326/1/EFForTS_dp-14.pdf (application/pdf)

Related works:
Journal Article: Comparing the Use of Risk influencing Production Inputs and Experimentally Measured Risk Attitude: Do the Decisions of Indonesian Small scale Rubber Farmers Match? (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:crc990:14

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