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Peasant Risk Aversion and Allocative Behavior: A Quadratic Programming Experiment
Author(s) -
Wiens Thomas B.
Publication year - 1976
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 - 10.2307/1238805
Subject(s) - allocative efficiency , peasant , risk aversion (psychology) , economics , shadow price , dual (grammatical number) , microeconomics , exponential utility , quadratic equation , yield (engineering) , econometrics , expected utility hypothesis , mathematical economics , mathematics , mathematical optimization , law , art , materials science , geometry , literature , metallurgy , political science
Abstract A quadratic risk programming model is used to examine the impact of yield uncertainty on peasant allocation of land among crops and use of hired factor services. The assumption of an exponential utility of income function permits sample estimation of the extent of risk aversion and interpretation of the dual solutions as shadow prices. Historical survey data on a Chinese village are used to show that optimization qualified by risk aversion proves superior to risk neutrality or credit constraints in explaining peasant allocative behavior.