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An Economic Analysis of Risk, Management, and Agricultural Technology

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  • Chavas, Jean-Paul
  • Shi, Guanming

Abstract

This paper uses conditional quantile regression to analyze the effects of genetically modified (GM) seed technology and management on production risk in agriculture, with an application to the distribution of corn yield in Wisconsin. Using the certainty equivalent (CE) as a welfare measure, our analysis decomposes the welfare effects of risk, management, and agricultural technology into two parts: mean effects and risk premium (measuring the cost of risk). We document how biotechnology and management interact to improve agricultural productivity and reduce farm risk exposure. For corn, we find that GM European Corn Borer (GM-ECB) technology consistently increases CE (the increase ranging from +4.6% to +11.8%) and that a significant part of this increase can come from risk reduction. We also show that the benefits of the GMECB biotechnology are heterogeneous: they vary significantly across regions as well as across management schemes

Suggested Citation

  • Chavas, Jean-Paul & Shi, Guanming, 2015. "An Economic Analysis of Risk, Management, and Agricultural Technology," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 40(1), pages 1-17.
    • Handle: RePEc:ags:jlaare:197377
    DOI: 10.22004/ag.econ.197377
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    References listed on IDEAS

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    Cited by:

    1. Nsabimana, Aimable, 2021. "Is change worth it? The effects of adopting modern agricultural inputs on household welfare in Rwanda," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 16(3), September.
    2. Nsabimana, Aimable & Adom, Philip Kofi, 2024. "Heterogeneous effects from integrated farm innovations on welfare in Rwanda," World Development Perspectives, Elsevier, vol. 33(C).
    3. Douadia Bougherara & Lana Friesen & Céline Nauges, 2021. "Risk Taking with Left- and Right-Skewed Lotteries," Journal of Risk and Uncertainty, Springer, vol. 62(1), pages 89-112, February.
    4. Jutao Zeng & Jie Lyu, 2023. "Simultaneous Decisions to Undertake Off-Farm Work and Straw Return: The Role of Cognitive Ability," Land, MDPI, vol. 12(8), pages 1-21, August.
    5. Bougherara, Douadia & Friesen, Lana & Nauges, Céline, 2022. "Risk-taking and skewness-seeking behavior in a demographically diverse population," Journal of Economic Behavior & Organization, Elsevier, vol. 201(C), pages 83-104.
    6. Mukasa, Adamon N., 2018. "Technology adoption and risk exposure among smallholder farmers: Panel data evidence from Tanzania and Uganda," World Development, Elsevier, vol. 105(C), pages 299-309.
    7. Zheng Li & Roderick M. Rejesus & Xiaoyong Zheng, 2021. "Nonparametric Estimation and Inference of Production Risk," American Journal of Agricultural Economics, John Wiley & Sons, vol. 103(5), pages 1857-1877, October.
    8. A Ford Ramsey, 2020. "Probability Distributions of Crop Yields: A Bayesian Spatial Quantile Regression Approach," American Journal of Agricultural Economics, John Wiley & Sons, vol. 102(1), pages 220-239, January.
    9. Kuroiwa, Kenichi & Chellattan Veettil, Prakashan & Gupta, Ishika, 2024. "Labor Scarcity and Technology Adoption in Agriculture: Evidence from Rural India during the COVID-19 Pandemic," 2024 Annual Meeting, July 28-30, New Orleans, LA 343851, Agricultural and Applied Economics Association.
    10. Aglasan, Serkan & Goodwin, Barry K. & Rejesus, Roderick, 2020. "Genetically Modified Rootworm-Resistant Corn, Risk, and Weather: Evidence from High Dimensional Methods," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 305181, Agricultural and Applied Economics Association.
    11. Dragos, Cristian Mihai & Dragos, Simona Laura & Mare, Codruta & Muresan, Gabriela Mihaela & Purcel, Alexandra-Anca, 2023. "Does risk assessment and specific knowledge impact crop insurance underwriting? Evidence from Romanian farmers," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 343-358.
    12. Elizabeth Nolan & Paulo Santos, 2019. "Genetic modification and yield risk: A stochastic dominance analysis of corn in the USA," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-10, October.
    13. Li, Zheng & Rejesus, Roderick M. & Zheng, Xiaoyong, 2018. "Nonparametric Estimation and Inference of Production Risk with Categorical Variables," 2018 Annual Meeting, August 5-7, Washington, D.C. 274400, Agricultural and Applied Economics Association.
    14. Du, Xiaodong & Dong, Fengxia, 2024. "Climate Change and Dynamics of Crop Yield Distribution," 2024 Annual Meeting, July 28-30, New Orleans, LA 343786, Agricultural and Applied Economics Association.
    15. Serkan Aglasan & Barry K. Goodwin & Roderick M. Rejesus, 2023. "Risk effects of GM corn: Evidence from crop insurance outcomes and high‐dimensional methods," Agricultural Economics, International Association of Agricultural Economists, vol. 54(1), pages 110-126, January.
    16. Souto, Augusto & Carriquiry, Miguel A. & Rosas, Juan Francisco, 2021. "Assessing the Impact of Agricultural Intensification on Water Pollution: An Integrated Model Assessment of the San Salvador Basin in Uruguay," 2021 Annual Meeting, August 1-3, Austin, Texas 314037, Agricultural and Applied Economics Association.
    17. Jean‐Paul Chavas & Céline Nauges, 2020. "Uncertainty, Learning, and Technology Adoption in Agriculture," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(1), pages 42-53, March.
    18. Do-il Yoo & Jean-Paul Chavas, 2021. "An analysis of risk aversion in biotechnology adoption: the case of US genetically modified corn," Empirical Economics, Springer, vol. 60(5), pages 2613-2635, May.
    19. Do‐il Yoo & Jean‐Paul Chavas, 2023. "Dynamic modeling of biotechnology adoption with individual versus social learning: An application to US corn farmers," Agribusiness, John Wiley & Sons, Ltd., vol. 39(1), pages 148-166, January.
    20. Luigi Biagini & Simone Severini, 2022. "How Does the Farmer Strike a Balance between Income and Risk across Inputs? An Application in Italian Field Crop Farms," Sustainability, MDPI, vol. 14(23), pages 1-15, December.
    21. Che, Yuyuan & Ghosh, Sujit K. & Rejesus, Roderick M., 2022. "Estimating Production Risk Effects with Inequality Constraints," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322189, Agricultural and Applied Economics Association.
    22. repec:ags:aaea22:335514 is not listed on IDEAS
    23. Bozzola, Martina & Smale, Melinda, 2020. "The welfare effects of crop biodiversity as an adaptation to climate shocks in Kenya," World Development, Elsevier, vol. 135(C).

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