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Peasant Risk Aversion and Allocative Behavior: A Quadratic Programming Experiment

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  • Thomas B. Wiens

Abstract

A quadratic risk programming model is used to examine the impact of yield uncertainty on peasant allocation of land among crops and use of hired factor services. The assumption of an exponential utility of income function permits sample estimation of the extent of risk aversion and interpretation of the dual solutions as shadow prices. Historical survey data on a Chinese village are used to show that optimization qualified by risk aversion proves superior to risk neutrality or credit constraints in explaining peasant allocative behavior.

Suggested Citation

  • Thomas B. Wiens, 1976. "Peasant Risk Aversion and Allocative Behavior: A Quadratic Programming Experiment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 58(4_Part_1), pages 629-635.
    • Handle: RePEc:oup:ajagec:v:58:y:1976:i:4_part_1:p:629-635.
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    File URL: http://hdl.handle.net/10.2307/1238805
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    13. Greif, Avner & Iyigun, Murat & Sasson, Diego, 2011. "Risk, Institutions and Growth: Why England and Not China?," IZA Discussion Papers 5598, Institute of Labor Economics (IZA).
    14. William T. Smith, 2022. "The optimal hedge ratio: A solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 42(2), pages 877-888.
    15. Gomez-Limon, Jose Antonio & Riesgo, Laura & Arriaza Balmón, Manuel, 2002. "Agricultural Risk Aversion Revisited: A Multicriteria Decision-Making Approach," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24827, European Association of Agricultural Economists.
    16. Gomez-Limon, Jose A. & Arriaza, Manuel & Riesgo, Laura, 2003. "An MCDM analysis of agricultural risk aversion," European Journal of Operational Research, Elsevier, vol. 151(3), pages 569-585, December.
    17. William T. Smith, 2023. "The optimal hedge ratio: A closed-form solution, a conjecture, and a challenge," Economics Bulletin, AccessEcon, vol. 43(2), pages 748-758.
    18. Lien, Gudbrand, 2002. "Non-parametric estimation of decision makers' risk aversion," Agricultural Economics, Blackwell, vol. 27(1), pages 75-83, May.
    19. K. C. Schaefer, 1992. "A Portfolio Model For Evaluating Risk In Economic Development Projects, With An Application To Agriculture In Niger," Journal of Agricultural Economics, Wiley Blackwell, vol. 43(3), pages 412-423, September.
    20. Ridier, Aude & Ben El Ghali, Mohamed & Nguyen, G. & Kephaliacos, Charilaos, 2013. "The role of risk aversion and labor constraints in the adoption of low input practices supported by the CAP green payments in cash crop farms," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement (RAEStud), Institut National de la Recherche Agronomique (INRA), vol. 94(2).
    21. Inmaculada Rodríguez-Puerta & Alberto A. Álvarez-López, 2016. "Optimal allocation of a fixed production under price uncertainty," Annals of Operations Research, Springer, vol. 237(1), pages 121-142, February.
    22. Hassan, Rashid M. & Hallam, Arne & D'Silva, B., 1988. "Stochastic Technology in a Programming Framework: A Generalized E. V. Model," 1988 Annual Meeting, August 1-3, Knoxville, Tennessee 270212, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    23. Fang Su & Udoy SAIKIA & Iain HAY, 2019. "Impact of Perceived Livelihood Risk on Livelihood Strategies: A Case Study in Shiyang River Basin, China," Sustainability, MDPI, vol. 11(12), pages 1-16, June.
    24. Daniel E. May & Jaime Rodríguez, 2014. "Farmers’ Economic Behaviour: Current Research and Research Gaps," Journal of Empirical Economics, Research Academy of Social Sciences, vol. 3(6), pages 362-369.
    25. Andrew J. Collins & Kasi Bharath Vegesana & Michael J. Seiler & Patrick O’Shea & Prasanna Hettiarachchi & Frederic McKenzie, 2013. "Simulation and mathematical programming decision-making support for smallholder farming," Environment Systems and Decisions, Springer, vol. 33(3), pages 427-439, September.

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