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Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match?

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  • Moser, Stefan
  • Mußhoff, Oliver

Abstract

This article compares the use of risk-increasing and risk-reducing production inputs with the experimentally measured risk attitudes of farmers. For this purpose, the Just-Pope production function indicates production inputs' influence on output risk and a Holt-Laury lottery is used to measure the producer´s risk attitude. We test whether more risk averse farmers use more risk-reducing and less risk-increasing production inputs. Therefore, we apply a unique data set which includes 185 small-scale farmers which are producing rubber on 260 plots on the island of Sumatra, Indonesia. The Just-Pope production function indicates that fertiliser usage has a risk-reducing effect, whereas herbicide usage and plot size have risk-increasing effects. For labour and plantation age, the influence on output risk is ambiguous. By including the outcome of a Holt-Laury lottery into the analysis, we found the expected result that more risk averse farmers use more (risk-reducing) fertiliser and less (risk-increasing) herbicides. These consistent results provide an example for the external validity of measuring risk attitude with the Holt-Laury lottery.

Suggested Citation

  • Moser, Stefan & Mußhoff, Oliver, 2015. "Comparing the use of risk-influencing production inputs and experimentally measured risk attitude: Do decisions of Indonesian small-scale rubber farmers match?," EFForTS Discussion Paper Series 14, University of Goettingen, Collaborative Research Centre 990 "EFForTS, Ecological and Socioeconomic Functions of Tropical Lowland Rainforest Transformation Systems (Sumatra, Indonesia)".
    • Handle: RePEc:zbw:crc990:14
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    More about this item

    Keywords

    Holt-Laury lottery; Just-Pope production function; output risk; rubber; Indonesia;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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