Comparing the Use of Risk influencing Production Inputs and Experimentally Measured Risk Attitude: Do the Decisions of Indonesian Small scale Rubber Farmers Match?

Stefan Moser and Oliver Musshoff

German Journal of Agricultural Economics, 2017, vol. 66, issue 2

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, a Just-Pope production function indicates production inputs’ influence on output risk, and a Holt-Laury lottery is used to measure farmers’ risk attitudes. We then test whether more risk averse farmers use more risk-reducing and less risk-increasing production inputs. To do so, a unique data set which includes 185 small-scale rubber farmers on the island of Sumatra, Indonesia, is used. The Just-Pope production function suggests that higher fertiliser usage has a risk-reducing effect, whereas higher herbicide usage has a risk-increasing effect. Comparing this with the outcome of a Holt-Laury lottery, we found that more risk averse farmers use more fertiliser (risk-reducing) and less herbicides (risk-increasing). The consistency of these results can be interpreted as reinforcing the external validity of measuring risk attitude with a Holt-Laury lottery.

Keywords: Farm Management; Institutional and Behavioral Economics; Production Economics; Productivity Analysis; Research Methods/ Statistical Methods; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:gjagec:303544

DOI: 10.22004/ag.econ.303544

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