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Comparison of conservation instruments under long-run yield uncertainty and farmer risk aversion

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Listed:
  • Meilin Ma
  • Carson Reeling
  • Megan N Hughes
  • Shalamar Armstrong
  • Richard Roth

Abstract

Consumers and policymakers are increasingly concerned with environmental sustainability in food production. Yet rates of adoption of many conservation practices vary and are generally low. Existing instruments for practice adoption increase farmers’ expected net benefits from sustainable practices but do not manage associated risks which may be critical to risk-averse farmers. We build a model to characterize practice adoption by risk-averse farmers given practice-driven, long-run yield dynamics under various instruments, including price premiums, lump-sum subsidies and green insurance. We find rich scale and compositional effects that differ across instruments and that green insurance is significantly more cost-effective under plausible conditions.

Suggested Citation

  • Meilin Ma & Carson Reeling & Megan N Hughes & Shalamar Armstrong & Richard Roth, 2023. "Comparison of conservation instruments under long-run yield uncertainty and farmer risk aversion," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 50(5), pages 1685-1714.
    • Handle: RePEc:oup:erevae:v:50:y:2023:i:5:p:1685-1714.
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    File URL: http://hdl.handle.net/10.1093/erae/jbad029
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