Does Liquidity Matter to Agricultural Production?
Farmers have a variety of tools with which to cope with risk. These tools include shifting their purchases of producer or consumer durable goods between periods, accumulating or depleting savings or buffer stocks, borrowing or restructuring debt, purchasing insurance, and participating in futures markets. Given the variety of methods farmers have for coping with risk, we first set out to answer the fundamental question: Does risk coping affect agricultural production decisions? To answer this we must address the issue of why risk matters. That is, what are the market failures that make risk matter and how do they affect producer behavior?
KeywordsCash Flow Unit Root Test Risk Preference Information Effect Price Shock
Unable to display preview. Download preview PDF.
- Alderman, H., and C.H. Paxson. 1994. “Do the Poor Insure? A Synthesis of the Literature on Risk and Consumption in Developing Countries.” Economics in a Changing World: Proceedings of the Tenth World Congress of the International Economic Association, Moscow (Vol. 4: Development, Trade and the Environment). lEA Conference Volume, No. 110. New York: St. Martin’s Press.Google Scholar
- Antle, J.M., and S.M. Capalbo. 2001. “Agriculture as a Managed Ecosystem: Implications for Econometric Analysis of Production Risk.” In R.E. Just and R.D. Pope, eds., A Comprehensive Assessment of the Role of Risk in U.S. Agriculture. Boston, MA: Kluwer Academic Publishers.Google Scholar
- Antle, J., and R. Just. 1990. “Interactions between Agricultural and Environmental Policies: A Conceptual Framework.” American Economic Review 80: 197–202.Google Scholar
- Dickey, D.A., and W.A. Fuller. 1979. “Distribution of the Estimators for Autoregressive Time Series with a Unit Root.” Journal of the American Statistical Association 74: 427–431.Google Scholar
- Dixit, A.K., and R.S. Pindyck. 1994. Investment Under Uncertainty. Princeton, NJ: Princeton University Press.Google Scholar
- Hubbard, R.G. 1998. “Capital-Market Imperfections and Investment. ” Journal of Economic Literature 36: 193–225.Google Scholar
- Just, R.E. 2000. “Some Guiding Principles for Empirical Production Research in Agriculture.” Agricultural and Resource Economics Review 29: 138–158.Google Scholar
- LaFrance, J.T., J. Shimshack, and S. Wu. 2000. “Crop Insurance and the Environment.” Working Paper. Department of Agricultural and Resource Economics, University of California, September.Google Scholar
- Loehman, E., and C. Nelson. 1992. “Optimal Risk Management, Risk Aversion, and Production Function Properties.” Journal of Agricultural and Resource Economics 17: 219–231.Google Scholar
- Marra, M.C., and G.A. Carlson. 2001. “Agricultural Technology and Risk.” In R.E. Just and R.D. Pope, eds., A Comprehensive Assessment of the Role of Risk in U.S. Agriculture. Boston, MA: Kluwer Academic Publishers.Google Scholar
- Modigliani, F., and M.H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” American Economic Review 48: 261–297.Google Scholar
- Paxson, C.H. 1992. “Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand.” American Economic Review 82: 15–33.Google Scholar
- Sandmo, A. 1971. “On the Theory of the Competitive Firm under Price Uncertainty.” American Economic Review 61: 65–73.Google Scholar
- Soule, M., W. Nimon, and D. Mullarkey. 2000. “Risk Management and Environmental Outcomes: Framing the Issues.” Paper presented at the workshop, “Crop Insurance, Land Use, and the Environment,” September 20–21, 2000, Economic Research Service, Washington, D.C.Google Scholar
- Stiglitz, J.E., and A. Weiss. 1981. “Credit Rationing in Markets with Imperfect Information.” American Economic Review 71: 393–410.Google Scholar
- Sumner, D.A., and H. Lee. 2000. “Discussion of the Effects of Federal Risk Management Subsidies on Crop Production Patterns.” Prepared for workshop on risk management research, Washington D.C., September 20, 2000.Google Scholar