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The profit impacts of risk management tool adoption

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  • Todd H. Kuethe
  • Mitch Morehart

Abstract

Purpose - The purpose of this paper is to measure the profit impacts of adopting input and output risk management tools at the farm level. Design/methodology/approach - The analysis examines three years of farm‐level data from the Agricultural Resource Management Survey (ARMS) that include detailed questions on the adoption of risk management tools. Propensity score matching is used to control for the endogeneity of adoption decisions, and the profit impacts are estimated based on the matched dataset. Findings - The adoption of input price risk management tools improves farm‐level profits by 13‐17 percent. Originality/value - This is the first paper which examines the profit impacts of risk management tools while controlling for the endogeneity of adoption.

Suggested Citation

  • Todd H. Kuethe & Mitch Morehart, 2012. "The profit impacts of risk management tool adoption," Agricultural Finance Review, Emerald Group Publishing Limited, vol. 72(1), pages 104-116, May.
    • Handle: RePEc:eme:afrpps:v:72:y:2012:i:1:p:104-116
    DOI: 10.1108/00021461211222178
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    References listed on IDEAS

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    3. Hisham S. El-Osta, 2018. "Strategies to Manage Risk and their Role in Impacting Economic Performance among Farm Households," Applied Economics and Finance, Redfame publishing, vol. 5(2), pages 49-64, March.
    4. Ifft, Jennifer & Kuethe, Todd & Morehart, Mitch, 2015. "Does Federal Crop Insurance lead to higher farm debt use? Evidence from the Agricultural Resource Management Survey," Working Papers 250011, Cornell University, Department of Applied Economics and Management.
    5. Geoffroy Enjolras & Magali Aubert, 2020. "How does crop insurance influence pesticide use? Evidence from French farms," Review of Agricultural, Food and Environmental Studies, INRA Department of Economics, vol. 101(4), pages 461-485.
    6. Hubbs, Todd & Kuethe, Todd H. & Ebel, Robert M. & Morehart, Mitchell J., 2012. "Should Farmers Use Futures and Options? A Pseudo-Experimental Analysis," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124822, Agricultural and Applied Economics Association.

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