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Income risk and farm consumption behavior

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  • Kevin Z. Chen
  • Karl D. Meilke
  • Calum Turvey

Abstract

Using panel data from Illinois grain farmers, a direct test of the relationship between income risk and farm consumption behavior is conducted. The estimation results indicate that income risk significantly affects farm consumption and the results are robust using alternative risk measures. This finding casts doubt on the relevance of the conventional life‐cycle permanent income hypothesis, which implies that risk has no effect on consumption.

Suggested Citation

  • Kevin Z. Chen & Karl D. Meilke & Calum Turvey, 1999. "Income risk and farm consumption behavior," Agricultural Economics, International Association of Agricultural Economists, vol. 20(2), pages 173-183, March.
    • Handle: RePEc:bla:agecon:v:20:y:1999:i:2:p:173-183
    DOI: 10.1111/j.1574-0862.1999.tb00562.x
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    1. Sand, Roald, 2002. "The Propensity to Consume Income from Different Sources and Implications for Saving: An Application to Norwegian Farm Households," Workshop on the Farm Household-Firm Unit: Its Importance in Agriculture and Implications for Statistics, April 12-13,2002, Wye Campus, Imperial College 15716, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
    2. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers 1127, International Food Policy Research Institute (IFPRI).

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