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The Role of Risk Mitigation in Production Efficiency: A Case Study of Potato Cultivation in the Bolivian Andes
Author(s) -
Larochelle Catherine,
Alwang Jeffrey
Publication year - 2013
Publication title -
journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.157
H-Index - 61
eISSN - 1477-9552
pISSN - 0021-857X
DOI - 10.1111/j.1477-9552.2012.00367.x
Subject(s) - diversification (marketing strategy) , production (economics) , production–possibility frontier , yield (engineering) , cluster (spacecraft) , economics , environmental science , vulnerability (computing) , natural resource economics , econometrics , business , materials science , computer security , marketing , computer science , metallurgy , macroeconomics , programming language
Using a stochastic production frontier to model potato production in Bolivia, we quantify the costs of environmental and activity diversification (AD) in the form of efficiency losses and yield forgone. We find that efficiency decreases with the number of fields in a geographical cluster, distance between the dwelling and a particular field, discontinuity between fields, and off‐farm income. However, environmental diversification (ED) is more detrimental than AD. Using spatial analysis of field and household efficiency measures, we assess production vulnerability to climatic shocks and the potential of ED in mitigating shocks. We find important spatial clusters of low and high efficiencies at the field level suggesting that climatic shocks influence efficiency measures. Household‐level efficiency measures exhibit random spatial patterns suggesting that on average households can mitigate the adverse effects of shocks through ED.