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Does risk management affect productivity of organic rice farmers in India? Evidence from a semiparametric production model

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  • Lien, Gudbrand
  • Kumbhakar, Subal C.
  • Mishra, Ashok K.
  • Hardaker, J. Brian

Abstract

This study analyzes the effects of farmers’ risk on productivity where the production function is generalized to be specific to risk variables. This resulted in a semiparametric smooth-coefficient (SPSC) production function. The novelty of the SPSC approach is that it can explain the direct and indirect channels through which risk can affect productivity. The study uses several measures of risk, including attitudes toward risk, perceptions of risk, and risk management skills of farmers. It then shows how these risk-related variables affect productivity both directly and indirectly via the inputs. Using 2015 farm-level data from organic basmati rice (OBR) smallholders in India, the study finds that OBR farmers with high degrees of risk aversion had lower productivity than less risk-averse or risk-neutral OBR farmers. Additionally, OBR farmers who were most concerned about production risks (i.e., weather and pest risks) had higher productivity than their counterparts. Finally, the study reveals that OBR farmers can reduce production costs by increasing farm size.

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  • Lien, Gudbrand & Kumbhakar, Subal C. & Mishra, Ashok K. & Hardaker, J. Brian, 2022. "Does risk management affect productivity of organic rice farmers in India? Evidence from a semiparametric production model," European Journal of Operational Research, Elsevier, vol. 303(3), pages 1392-1402.
    • Handle: RePEc:eee:ejores:v:303:y:2022:i:3:p:1392-1402
    DOI: 10.1016/j.ejor.2022.03.051
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    1. Khanal, Aditya R. & Mishra, Ashok K. & Lien, Gudbrand, 2022. "Risk Aversion, Perceived Climatic and Pest Risks, and the Adoption of Management Strategies: Evidence from an Emerging Economy," 2022 Annual Meeting, July 31-August 2, Anaheim, California 322239, Agricultural and Applied Economics Association.

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    More about this item

    Keywords

    OR in agriculture; Productivity; Production risk; Semiparametric model; Organic rice;
    All these keywords.

    JEL classification:

    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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