Risk preference and productivity measurement under output price uncertainty

Subal Kumbhakar

Empirical Economics, 2002, vol. 27, issue 3, 472 pages

Abstract: This paper deals with joint estimation of production and risk preference functions in the presence of output price uncertainty. We use quadratic production and utility functions under the assumption that producers maximize expected utility of anticipated profit. A panel data on Norwegian salmon farms is used for this purpose. Empirical results show that all salmon farmers are risk averse. Relative risk premium (the implicit cost of private risk bearing) is found to be about 15% of mean profit. We also find rapid technological change taking place (3.75% per year) in the salmon farming industry.

Keywords: Production; function; ·; risk; averse; ·; risk; premium; ·; salmon; farming (search for similar items in EconPapers)
Date: 2002-04-26
Note: received: February 2000/Final version received: February 2001
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Citations: View citations in EconPapers (26)

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Empirical Economics is currently edited by Robert M. Kunst, Arthur H.O. van Soest, Bertrand Candelon, Subal C. Kumbhakar and Joakim Westerlund

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