Production Risk and Optimal Fertilizer Rates: A Random Coefficient Model

Joyotee Smith and Gloria Umali

American Journal of Agricultural Economics, 1985, vol. 67, issue 3, 654-659

Abstract: This paper demonstrates that low levels of fertilizer use on rainfed rice in the Philippines cannot be attributed to production risk. A random coefficient model estimated the objective probability distribution of yield. This was incorporated into a utility-maximization framework to predict that moderately risk-averse farmers would apply only seven to ten kilograms less than the profit-maximizing N-rate. Previous studies have established that risk was not a major impediment to fertilizer use in irrigated areas. This paper extends this conclusion to rainfed rice production in the Philippines.

Date: 1985
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Persistent link: https://EconPapers.repec.org/RePEc:oup:ajagec:v:67:y:1985:i:3:p:654-659.

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