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Scale, productivity growth and risk response under uncertainty

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  • Hranaiova, Jana
  • Stefanou, Spiro E.

Abstract

SUMMARY - This study focuses on the analysis of the production behavior and risk preferences in the presence of output price uncertainty. Following a theoretical model based on the assumption of maximization of expected utility of profits, the approach used in this study infers information about risk preferences from the production characteristics of the farm. In addition, the nonparametric method of estimating elasticity of scale and technical change eliminates the need to impose a uniform production or cost functions on individual producers. The approach is applied to a panel of dairy farms, which are evaluated for their elasticity of scale and the total productivity growth components of their operations. Estimates of farmers' risk attitudes represented by individual marginal risk premiums are also related to socio-economic attributes of farmers. Overall, farm size plays an important role in explaining productivity and scale differences and has the most significant negative effect on marginal risk aversion. The magnitude of the impact of additions to the farm's dairy herd increases with scale of operations. RESUMEN - El objetivo de este trabajo es el análisis del comportamiento de la producción y en las preferencias ante el riesgo en condiciones de incertidumbre en el precio de salida. Siguiendo un modelo teórico basado en la asunción de maximización de utilidad de los beneficios, el enfoque empleado en este trabajo permite obtener información relativa a las preferencias ante el riesgo a partir de las características de la explotación. Además, el método no-paramétrico de estimación de la elasticidad de la escala y del cambio técnico elimina la necesidad de imponer una producción uniforme o funciones de precio sobre productores particulares. Este enfoque se aplica a un panel de explotaciones lecheras, que son evaluadas en función de los componentes relativos a su elasticidad de escala y al incremento total de la productividad de sus operaciones. Las estimaciones en torno a las actitudes de los productores ante el riesgo representadas por primas individuales por riesgos marginales están igualmente relacionadas con a los atributos socioeconómicos de los productores. En conjunto, el tamaño de la explotación es importante para explicar las diferencias en productividad y escala, y produce el efecto negativo más significativo sobre la aversión al riesgo marginal. La magnitud del impacto de nuevas incorporaciones de cabezas de ganado a los rebaños en explotaciones lecheras aumenta con la escala de las operaciones.

Suggested Citation

  • Hranaiova, Jana & Stefanou, Spiro E., 2002. "Scale, productivity growth and risk response under uncertainty," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 2(02), pages 1-19.
    • Handle: RePEc:ags:earnsa:28760
    DOI: 10.22004/ag.econ.28760
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    References listed on IDEAS

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    Keywords

    Productivity Analysis;

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