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Using Consumption and Asset Return Data to Estimate Farmers' Time Preferences and Risk Attitudes
Author(s) -
Lence Sergio H.
Publication year - 2000
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/0002-9092.00092
Subject(s) - expected utility hypothesis , consumption (sociology) , economics , econometrics , asset (computer security) , risk aversion (psychology) , production (economics) , actuarial science , microeconomics , computer science , financial economics , social science , computer security , sociology
The generalized expected utility model is fitted to U.S. farm data to estimate farm operator's time preferences and risk attitudes. The estimated farmer's utility parameters are quite “reasonable” and exhibit high accuracy. The forward‐looking expected utility model is soundly rejected in favor of the generalized expected utility paradigm. Importantly, the generalized expected utility model is also found to fit the data better than the myopic model typically used to study agricultural production under risk. Finally, U.S. farmers' relative aversion to risk appears to have diminished significantly over time