Do Risk Preferences Really Matter? The Case of Input Use in Agriculture

Christophe Bontemps (), Douadia Bougherara () and Celine Nauges ()
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Christophe Bontemps: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique
Douadia Bougherara: CEE-M - Centre d'Economie de l'Environnement - Montpellier - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement - Institut Agro - Montpellier SupAgro - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement
Celine Nauges: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Farmers' main reasons for using pesticides are, first, to increase the expected value of crop yields and, second, to insure against the risk of production variability. Using simulated data, we show that, under fairly representative conditions on the technology and risk preferences, the increase in expected yield is the primary driver of pesticide use. For moderate to high risk-averse farmers, only 5 to 15% of the optimal input use is devoted to risk management. This calls for a tax on pesticide to be preferred to insurance premium subsidisation if the aim is to incentivise farmers to reduce pesticide use.

Date: 2019-06-24
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Published in LEEP Institute's Meeting of International Excellence in Environmental and Resource Economics,, EAERE, Jun 2019, Exter, United Kingdom

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04971967

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