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on Agricultural Economics |
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Issue of 2013‒05‒24
twenty-one papers chosen by |
| By: | Thomson, Henry |
| Abstract: | This study estimates the short-run effects of the structure of the local economy on high school dropout rates in agricultural areas in the United States from 2000 to 2010. Repeated cross-sections of census data are matched to state-level agricultural price indices and data on the regional composition of employment. Some authors theorise that human capital and land are substitutes, and increasing returns to land-intensive activities may lower human capital investments. I do not find empirical evidence of this in the rural United States. In fact, I find some evidence that as agriculture becomes more lucrative young people in areas with very high levels of agricultural employment become more likely to stay in school, not less, relative to those in areas with little or no agriculture within each state. |
| Keywords: | Labor and Human Capital, |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umapmt:148745&r=agr |
| By: | Elskamp, Rebecca; Hailu, Getu |
| Abstract: | We examine the effect of farm level cost and scale efficiencies on dairy quota exchanges in Ontario. A constrained profit maximization framework is used to illustrate the role of cost efficiency in quota exchanges (i.e., sales and purchases). Using a multinomial logit model, where net quota buyers and net quota sellers are identified our empirical results indicate that variations in cost efficiency do not have a significant effect on purchases milk production quota, whereas scale efficiency does. Younger farmers, farms with underutilized barns space and farms with a recent history of quota purchase tend to buy milk production quota. |
| Keywords: | dairy, cost efficiency, scale efficiency, quota transfers, supply management, Agribusiness, Agricultural and Food Policy, Agricultural Finance, Demand and Price Analysis, Farm Management, |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:ags:catpwp:148901&r=agr |
| By: | Sakurai, Takeshi |
| Abstract: | The enhancement of agricultural productivity is the key to economic development of Sub-Saharan Africa. Particularly, the intensification of lowland agriculture is critically important in West Africa since demand for rice and vegetables is increasing rapidly due to urbanization. As has been debated much, informal land tenure system in Sub-Saharan Africa can be a constraint to the intensification. This paper, applying an endogenous switching probit model where lowland ownership is endogenously selected, analyzes data collected in the area around two large inland cities, Bouaké in Côte d’Ivoire and Kumasi in Ghana. Regression results reveal that village ownership has a positive impact on the intensification of lowland cropping in the Bouaké area, while it discourages the intensification of lowland cropping as well as investment in tree plantation in lowlands in the Kumasi area. The findings support the hypotheses since land is relatively scarcer in the Kumasi area than in the Bouaké area. |
| Keywords: | informal land ownership, lowland agriculture, intensification, land use, crop choice, Côte d’Ivoire, Ghana |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:hit:hituec:586&r=agr |
| By: | Vickner, Steven |
| Abstract: | This poster summarizes the parameter estimates from a hedonic pricing model of shell eggs. |
| Keywords: | food safety, food quality, agribusiness, hedonic pricing, salmonella, pasteurized shell eggs, organics, food product recalls, Agribusiness, Agricultural and Food Policy, Food Consumption/Nutrition/Food Safety, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:148848&r=agr |
| By: | Hoppe, Robert |
| Abstract: | Over the past three decades, the number of women-operated farms increased substantially. In 2007, women operated 14 percent of all U.S. farms, up from 5 percent in 1978. Women-operated farms increased in all sales classes, including farms with annual sales of $1 million or more. Most women farmers operated very small farms in 2007; about three-fourths of their farms had sales of less than $10,000. A small share of their farms (5 percent), however, sold $100,000 or more in farm products. About half of women-operated farms specialized in grazing livestock—beef cattle, horses, and sheep or goats. In addition to a principal operator, some farms have secondary operators. If both principal and secondary operators are counted, the number of women operators in 2007 expands from 306,200 to nearly 1 million. |
| Keywords: | farm operators, farm structure, farm women, female farm operators, female-operated farms, small farms, women farm operators, women-operated farms, women in agriculture, Agricultural and Food Policy, |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:uersib:148543&r=agr |
| By: | Buckley, Cathal; Hynes, Stephen; Mechan, Sarah |
| Abstract: | In the European Union, mitigation measures to abate diffuse pollution from agricultural land are implemented under the direction of the EU Nitrates and Water Framework Directives. As these measures are implemented in national policies, a review process will look at the efficacy of the measures with a view to recommending further measures as necessary. This study examines the willingness of farmers to adopt riparian buffer zones on agricultural land. A total of 247 farmers in 12 catchments in the Republic of Ireland were asked their opinion in relation to a proposal to install a 10 metre deep riparian buffer zone under a five year scheme and the analysis was based on principal components analysis, contingent valuation methodology and a Generalized Tobit Interval model. Results from this analysis indicated that famers’ willingness to supply a riparian buffer zone depended on a mix of economic, attitudinal and farm structural factors. A total of 53% of the sample indicated a negative preference for provision. Principle constraints to adoption include interference with production, nuisance effects and loss of production in small field systems. Of those willing to engage with supply, the mean willingness to accept based cost of provision for a 10 metre riparian buffer zone was estimated to be €1513 ha-1 per annum equivalent to €1.51 per linear metre of riparian area. |
| Keywords: | Riparian buffer zone, farmers, ecosystem service, willingness to accept, Environmental Economics and Policy, Land Economics/Use, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:semrui:148830&r=agr |
| By: | Hamazakaza, Petan; Smale, Melinda; Kasalu, Helen |
| Abstract: | following the 1991 economic liberalisation and Structural Adjustment Programme witnessed an influx of foreign based seed companies whose primary investment in the Zambian seed industry was in maize seed improvement and marketing. The crop has received considerable government attention over the years in terms of financial investment to support smallholder farmer access to seed and fertilizer. In this regard, government introduced the subsidized Farmer Input Support Programme (FISP) in 2002/03 and by 2010, about 1,210,520 resource constrained farmers had benefited from the programme. |
| Keywords: | Zambia, Maize, Agricultural and Food Policy, International Development, |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:midcwp:148808&r=agr |
| By: | Pouliot, Sébastien; Sumner, Dan |
| Abstract: | Country of origin labeling (COOL) is a common practice. It occurs routinely for many products in many places, but the US implementation of mandatory COOL for meat, whose purpose is to identify the origin of the livestock used to produce the meat, generated much controversy and a major WTO dispute that has yet to be settled. This working paper estimates econometrically differential market impacts of mandatory country of origin labels on cattle raised in Canada and imported into the United States. We find significant evidence of differential impacts of COOL through widening of the price bases and a decline in ratios of imports to total domestic use for both fed and feeder cattle. |
| Keywords: | Country of Origin Labelling, trade dispute, Agricultural and Food Policy, International Relations/Trade, Q17, Q18, F1, L15, |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:148593&r=agr |
| By: | Taheripour, Farzad; Tyner, Wallace E.; Fiegel, Julie |
| Abstract: | This paper first develops a partial equilibrium (PE) model to examine impacts of converting corn stover to biofuel on markets for corn and soybeans at the national market level. The PE model links gasoline, corn ethanol, dried distiller grains, corn, soybeans, and soybean meal markets in the presence and absence of a viable market for corn stover. The model also includes a technology which converts corn stover to bio-gasoline (a drop-in biofuel). The model evaluates profitability of the ethanol and bio-gasoline industries and assumes that these industries will expand/contract until profits reach zero. Given these assumptions and according to the predetermined supply and demand elasticities, the model determines equilibrium prices and their corresponding quantities for given exogenous variables defined in the model (such as crude oil price). The model is calibrated using data obtained for 2010 for USA economy and then solved for alternative crude oil prices in the presence and absence of a fixed subsidy of $1.01per gallon of bio-gasoline produced. Then we used the Purdue Crop Linear Programing (PCLP) model to assess farmers’ reactions to market equilibrium prices for corn, soybeans, and corn stover in the presence of a viable market for corn stover. The PCLP model determines profit-maximizing decisions for a given farm given its existing resources and estimated prices of commodities and input costs. We tuned the PCLP model according to the market clearing prices obtained from the PE model for a case when the crude oil price is $100 per barrel. Then using the tuned PCLP model we determined the optimum land allocation options for farmers. The partial equilibrium analyses show that: 1) with no bio-gasoline subsidy a limited amount of corn stover will be converted to biofuel even at very high crude oil prices; 2) The bio-gasoline subsidy could significantly boost production of this biofuel in particular at medium and higher crude oil prices; 3) no more than 45% of available corn stover will be removed for biofuel production; 4) converting corn stover to bio-gasoline boosts corn production, increases corn-corn rotation, and decreases supply of soybeans; and 5) converting corn stover to bio-gasoline changes the soybean to corn price ratio in favor of soybeans, at least in the very short term. The results obtained from the PCLP model show that the farm level land allocation decision is sensitive to the profitability of corn stover processing activities. When corn stover removal is introduced as a new option under the base case scenario at a corn stover price of $111 per ton) farmers allocate about 66% of their land to the corn-corn rotation and remove stover from their land. In this case corn stover is removed from 78.2% of available land at a rate of 1.18 tons per acre. If corn stover is demanded for biofuel production, then a major shift will be observed in crop rotations. |
| Keywords: | biofuel, corn stover, crop rotation, Resource /Energy Economics and Policy, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea13:148851&r=agr |
| By: | Abbassi, Abdessallem; Larue, Bruno |
| Abstract: | The paper analyzes the welfare impacts of trade liberalization under multiple marginalization through a spatial quilibrium model of provincial dairy markets. Canada’s dairy policy implements a supply management scheme designed to achieve higher domestic prices for farmers, taking into account the mark-up rules used by downstream firms. Our model builds on the reciprocal dumping model of Brander and Krugman (1983) as processing firms from different provinces compete à la Cournot with one another in several provinces. Simulations reveal that welfare in the Canadian dairy sector could increase by as much as $1 billion per year if aggressive tariff cuts were made while moderate liberalization plans would yield annual gains of $234.5 million. Even large producing provinces like Quebec and Ontario gain from trade liberalization. In comparison, a perfect competition model yields more modest welfare gains in the range of $15.6 million and $34.5 million. Finally, we show that the switch in the sign of the transport cost-welfare relation identified by Brander and Krugman (1983) occurs at transport costs that are too high to be policy-relevant. |
| Keywords: | Double marginalization, supply management, dairy industry, reciprocal dumping, Agricultural and Food Policy, International Relations/Trade, Livestock Production/Industries, Q17, F12, L13, |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:148592&r=agr |
| By: | Neudert, Regina; Rühs, Michael |
| Abstract: | Within the context of transition and pasture reform in Central Asian and Caucasian countries our study focuses on the pasture reform in Azerbaijan. The pasture reform in Azerbaijan has received little attention in scientific literature although it displays a rapid emergence of individualised rights for pasture plots, which is an exceptional development in this region. Using empirical case study evidence we analyse the implementation and outcomes of the reform process for pastoral land in the context of the macroeconomic development in Azerbaijan and in comparison to pasture reforms in other post-socialist transition countries. We apply the evolutionary theory of property rights to explain and analyse the exceptionally rapid emergence of individual property rights for pasture in Azerbaijan. |
| Keywords: | Agricultural and Food Policy, Community/Rural/Urban Development, Environmental Economics and Policy, Farm Management, Institutional and Behavioral Economics, International Development, Political Economy, |
| Date: | 2013–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:huiain:148489&r=agr |
| By: | Lukas Vacha; Karel Janda; Ladislav Kristoufek; David Zilbermand |
| Abstract: | For the first time, we apply the wavelet coherence methodology on biofuels (ethanol and biodiesel) and a wide range of related commodities (gasoline, diesel, crude oil, corn, wheat, soybeans, sugarcane and rapeseed oil). This way, we are able to investigate dynamics of correlations in time and across scales (frequencies) with a model-free approach. We show that correlations indeed vary in time and across frequencies. We find two highly correlated pairs which are strongly connected at low frequencies { ethanol with corn and biodiesel with German diesel { during almost the whole analyzed period (2003-2011). Structure of correlations remarkably changes during the food crisis { higher frequencies become important for both mentioned pairs. This implies that during stable periods, ethanol is correlated with corn and biodiesel is correlated with German diesel mainly at low frequencies so that they follow a common long-term trend. However, in the crisis periods, ethanol (biodiesel) is led by corn (German diesel) even at high frequencies (low scales), which implies that the biofuels prices react more rapidly to the changes in their producing factors. |
| Keywords: | biofuels, prices, correlations, wavelet coherence |
| JEL: | C22 Q16 Q42 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2013-27&r=agr |
| By: | Singh, K.M.; Singh, R.K.P.; Jha, A.K.; Kumar, Anjani |
| Abstract: | Livestock is an integral part of rural economy in Bihar and fodder is a critical input for livestock development. Data shows that there exist a huge gap between demand and supply of fodder (both dry as well as green). Most part of the south Bihar comprising of agro climatic zones, IIIA and IIIB are fodder surplus because of cultivation of paddy and wheat under assured irrigation facilities. Agro climatic Zone I and Zone II are fodder deficit and mostly depend on fodder surplus regions for their fodder requirement. In order to promote fodder production and requirement it is imperative for the Government to come forward and develop fodder storage facilities at different locations in different regions, so that farmers could store fodder to ensure its availability throughout the year. Due to lack of adequate storage facilities and space producers are forced to dispose the fodder in excess of their marketable surplus and therefore many times marketed surplus exceeds the actual marketable surplus in this way. Institutional support in the form of credit and creation of fodder banks in different fodder producing as well as deficit areas for maintaining buffer stock is essential. Fodder markets are highly unorganized and informal and the role of public sector/govt. in its marketing is virtually negligible. Most of the fodder markets are running on different places do not have any dedicated market place.. Most of the fodder markets are operating along the roadsides and have no legal credentials. This becomes one of the reasons of exploitation of people who are involved in this business. It is envisaged that establishment of dedicated and legal market places would help fodder trade a great deal and also check corrupt practices and exploitations of poor producers and traders. Fodder is a bulky item, which makes its trading cumbersome and handling difficult. Some traders use compressing machines to make fodder blocks. It is important to develop some cost effective and efficient fodder compressing machine for ease of handling and transportation as well as cost saving. Quality control of manufactured compound feed and concentrates is also essential. Most of the traders and consumers feel that there should be a mechanism to ensure quality of manufactured feed and nutritional supplements. Development of technology for cost effective and nutritive feed is requires urgent attention and here Public sector R&D can play an effective role. This can also be done in public-private partnership mode. |
| Keywords: | Fodder, Feeds, Bihar, Fodder marketing, Green fodder, Dry Fodder |
| JEL: | Q1 Q10 Q11 Q12 Q13 Q19 |
| Date: | 2012–10–14 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:47059&r=agr |
| By: | Mattos, Fabio; Poirier, Jamie |
| Abstract: | This study examines formation and adaptation of reference prices by Manitoban grain producers. Research shows that preferences are reference‐dependent and marketing decisions are affected by reference prices. Results suggest that Manitoban producers’ reference prices are formed primarily by an average of recent prices and the highest price to‐date in the marketing window. Reference prices are found to adapt in the same direction as market prices, with adaptation to increasing prices being larger than adaptation to decreasing prices. When deciding to sell grain, producers are more likely to sell when they expect prices to decrease over the next month and when their reference price adjusts downwards towards the current price. |
| Keywords: | grain marketing, reference prices, Agribusiness, Crop Production/Industries, Institutional and Behavioral Economics, Risk and Uncertainty, C93, D03, D81, Q13, |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:148591&r=agr |
| By: | Doherty, Edel; Campbell, Danny; Hynes, Stephen |
| Abstract: | Farmland can confer significant public good benefits to society aside from its role in agricultural production. In this paper we investigate preferences of rural residents for the use of farmland as a recreational resource. In particular we use the choice experiment method to determine preferences for the development of farmland walking trails. Our modelling approach is to use a series of mixed logit models to assess the impact of alternative distributional assumptions for the cost coefficient on the welfare estimates associated with the provision of the trails. Our results reveal that using a mixture of discrete and continuous distributions to represent cost heterogeneity leads to a better model fit and lowest welfare estimates. Our results further reveal that Irish rural residents show positive preferences for the development of farmland walking trails in the Irish countryside. |
| Keywords: | Land use, mixed logit models, Environmental Economics and Policy, Land Economics/Use, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:semrui:148832&r=agr |
| By: | John C. Beghin; Amani Elobeid (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)) |
| Abstract: | We analyze the various welfare costs, transfers, trade, and employment consequences of the current U.S. sugar program for U.S. consumers, other sugar users, sugar refiners, cane and beet growing and processing industries, other associated agricultural sectors, and world markets. The removal of the sugar program would increase U.S. consumers’ welfare by $2.9 to $3.5 billion each year and generate a modest job creation of 17,000 to 20,000 new jobs in food manufacturing and related industries. Imports of sugar containing products would fall dramatically, especially confectioneries substituting for domestic inputs under the sugar program. Sugar imports would rise substantially to 5 to 6 million short tons raw sugar equivalent. World price increases would be minor, equivalent to about 1 cent per pound. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:ias:fpaper:13-wp538&r=agr |
| By: | Imori, Denise; Guilhoto, Joaquim José Martins; Postali, Fernando Antonio Slaibe |
| Abstract: | This paper aims to analyze the technical efficiency of farms in Brazil and its regions, based on the data from the 2006 Census of Agriculture. More specifically, it seeks to compare the technical efficiency of family farms in relation to business farms, considering the regional differences in the country. To do so, one simultaneously estimated, under different assumptions, stochastic production frontiers and inefficiency effects models. Thus, it was possible to measure the technical efficiency of farms, as well as analyze the influence of factors related to the production environment, allowing the indication of public policies aimed at improving the performance of producers. In the empirical estimation, it was observed, as expected, lower technical efficiency for family farms. In regional terms, with respect to the technical efficiency of business farms, the South region of Brazil stood out, also presenting, along with the Midwest region, the highest efficiency rates for family farms, on average. Regarding the influence of production environment, it was found that formal education and access to credit are noteworthy as important factors for the technical efficiency of Brazilian agriculture. |
| Keywords: | Census of agriculture; Econometrics; Agriculture economics |
| JEL: | D24 Q12 R11 |
| Date: | 2012–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:46995&r=agr |
| By: | Pouliot, Sébastien |
| Abstract: | This essay shows the role of economics in the adulteration of food imports.The mechanism of impact in the model is the choice of input quality by exporting firms. One implication of the model is that conomic variables can be used to predict adulteration in food imports. The essay offers an application to US fish and seafood imports following the closing of fisheries in the Gulf of Mexico because of the Deepwater Horizon platform oil spill. Simulations show an increase in adulteration in fish and seafood imports after the Deepwater Horizon incident. Empirical evidence supports simulations' findings. |
| Keywords: | Adulteration, Food Safety, Inspection, Trade, Institutional and Behavioral Economics, International Relations/Trade, Q18, F1, L15, |
| Date: | 2012–12 |
| URL: | http://d.repec.org/n?u=RePEc:ags:spaawp:148596&r=agr |
| By: | Charles E. McLure, Jr. (Hoover Institution, Stanford University) |
| Abstract: | This paper examines subsidies for the consumption of fossil fuels provided by developing countries and oil-exporting countries. (In what follows all unqualified references to fuel subsidies are to subsidies for the consumption of fossil fuels, including electricity that is generated by combusting fossil fuel. Thus neither production subsidies nor subsidies for other types of energy, such as hydro, solar, wind, and nuclear, are considered.6 In this context, “consumption” does not mean only household consumption; it includes consumption by business and governments.) The next section describes the negative effects of fuel subsidies mentioned above in greater detail. Although emphasis in this paper, as in most of the literature and in policy discussions, is on eliminating fuel subsidies, it should be emphasized that reforming fuel subsidies does not necessarily mean eliminating them quickly. There may be cases in which temporary, limited, and well-targeted fuel subsidies are appropriate. No effort has been made to identify these cases, which would require case-by-case analysis of the situation in particular countries. Progress has been made in recent years in reducing or eliminating subsidies to the consumption of fossil fuels, but much remains to be done.7 Section III discusses briefly how fuel subsidies are defined, describes the price-gap methodology commonly used in cross-country comparisons of consumption subsidies, indicates some shortcomings in that methodology, and notes that the level of subsidies is quite sensitive to international fuel prices, moving in concert with them. Section IV presents estimates of fossil fuel consumption subsidies for the 37 countries on which the International Energy Agency has complete data. The section then briefly describes some of the implications of eliminating subsidies, focusing on potential budget impacts in countries that, as a fraction of GDP, run significant budget deficits and spend significant amounts on fuel subsidies. Fuel consumption subsidies are often defended as alleviating poverty, and some subsidies may further this objective. But, because fuel subsidies are often poorly targeted, the distributional impact of many subsidies is regressive, or at best proportionate to income. Regressivity is especially likely in most of the countries of Sub-Saharan Africa and some of those in Asia, where only a small minority of the population – fewer than 10 percent in many countries – uses modern fuels and may not even have access to them. It is often the middle class who benefit the most from fuel subsidies – and who defend them most adamantly.8 Section V discusses the distributional impact of eliminating subsidies, which varies from country to country, as well as by the type of fuel subsidized. Although fuel subsidies are costly and are not well-targeted to relieve poverty, eliminating subsidies may impose onerous burdens on the poor. It may thus be necessary, for humanitarian as well as political reasons, to accompany subsidy reform with measures to alleviate the burden on the poor. Section VI examines measures that can be used to protect the poor when fuel consumption subsidies are reformed. Lack of space and expertise precludes discussion of the important issues involved in implementing fuel subsidy reform, including means of increasing support for reform by addressing distributional concerns.9 The use of biomass (firewood, charcoal, straw, agricultural residue, or dung) or coal for cooking and heating has several serious disadvantages: inter alia, emissions of GHGs are greater than with fossil fuels other than coal, dangerous indoor air pollution leads to impaired health, especially for women and small children, use of biomass often requires devotion of many hours to gathering fuel, again commonly by women and children, and, where dung is used for fuel, it causes deterioration of soil fertility. In recent years substantial attention has been devoted to assuring access to clean energy for all.10 An alternative argument for subsidizing the use of fossil fuels, albeit one that probably does not explain the prevalence of subsidies, is thus to induce poor households to shift from biomass and coal (solid or “traditional fuels”) to modern (non-solid) fuels (kerosene, gas, and electricity). Section VII discusses the use of fuel subsidies to encourage consumers to switch from traditional fuels to modern fuels. A short concluding section draws some tentative conclusions, based on the analysis presented earlier. There is clearly a strong case for reforming subsidies to the consumption of fossil fuels, as reform would improve environmental, economic, and budgetary, performance in countries now providing fuel subsidies. Care must be taken, however, to avoid or offset adverse effects on the real income of the poor. |
| Date: | 2013–04–07 |
| URL: | http://d.repec.org/n?u=RePEc:ays:ispwps:paper1312&r=agr |
| By: | Doherty, Edel; Campbell, Danny; Hynes, Stephen; van Rensburg, Thomas |
| Abstract: | Discrete choice experiment data aimed at eliciting the demand for recreational walking trails on farmland in Ireland is used to explore whether some respondents reach their choices solely on the basis of the alternative’s label. To investigate this type of processing strategy, this paper exploits a discrete mixtures approach that also encompasses continuous distributions to reflect the heterogeneity in preferences for the attributes. We find evidence that a proportion of respondents adopt this processing strategy and that the strategies employed by rural and urban respondents are somewhat different. Results further highlight that model fit and measures of welfare are sensitive to assumptions related to processing strategies among respondents. |
| Keywords: | Discrete choice, discrete mixtures approach, Environmental Economics and Policy, Land Economics/Use, |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:ags:semrui:148831&r=agr |
| By: | Svend Rasmussen (Department of Food and Resource Economics, University of Copenhagen) |
| Abstract: | Current methods of risk management focus on efficiency and do not provide operational answers to the basic question of how to optimise and balance the two objectives, maximisation of expected income and minimisation of risk. This paper uses the Capital Asset Pricing Model (CAPM) to derive an operational criterion for the optimal risk management of firms. The criterion assumes that the objective of the firm manager is to maximise the market value of the firm and is based on the condition that the application of risk management tools has a symmetric effect on the variability of income around the mean. The criterion is based on the expected consequences of risk management on relative changes in the variance of return on equity and expected income. The paper demonstrates how the criterion may be used to evaluate and compare the effect of different risk management tools, and it illustrates how the criterion should be applied to integrate risk management at the strategic, tactical and operational level. The paper concludes that the derived criterion for optimal risk management provides a valuable theoretical tool for the economic evaluation of the consequences of risk management. |
| Keywords: | firm value, CAPM, optimal risk management, return on equity, risk, expected income |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:foi:wpaper:2013_10&r=agr |