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Expossure To Risk And Risk Management In Smallholder Agriculture

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  • Ayenew, Habtamu Yesigat
  • Sauer, Johannes
  • Abate-Kassa, Getachew

Abstract

Using a moment based approach, introduced by Antle for producers’ risk behavior elicitation, we develop an empirical model to evaluate the implication of risk preferences on farm portfolio decisions. With a comprehensive household level panel data of rounds of 2004 and 2009, we estimate risk aversion behavior of farm households in uncertain climate and market imperfections. To solve the problem of endogeneity, the risk parameter is instrumented in a two stage maximum likelihood estimation technique, and used as a determinant of the level of farm level diversification. We find that farmers with higher level of relative risk premium will more likely opt for diversified farms. The engagement of farm households to off and non-farm income generating activities could likely reduce the on-farm diversification level. On-farm diversification and engagement in off-farm and non-farm activities can be considered as substitutable risk mitigation strategies

Suggested Citation

  • Ayenew, Habtamu Yesigat & Sauer, Johannes & Abate-Kassa, Getachew, 2015. "Expossure To Risk And Risk Management In Smallholder Agriculture," 55th Annual Conference, Giessen, Germany, September 23-25, 2015 209211, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi15:209211
    DOI: 10.22004/ag.econ.209211
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    Cited by:

    1. Aniseh S. Bro, 2020. "Climate Change Adaptation, Food Security, and Attitudes toward Risk among Smallholder Coffee Farmers in Nicaragua," Sustainability, MDPI, vol. 12(17), pages 1-17, August.
    2. Hadush, Muuz, 2018. "Impact of improved animal feeding practice on milk production, consumption and animal market participation in Tigrai, Ethiopia," Problems of Agricultural Economics / Zagadnienia Ekonomiki Rolnej 276473, Institute of Agricultural and Food Economics - National Research Institute (IAFE-NRI).

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    Keywords

    Farm Management; Land Economics/Use; Risk and Uncertainty;
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