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Production Risk and Optimal Fertilizer Rates: A Random Coefficient Model
Author(s) -
Smith Joyotee,
Umali Gloria
Publication year - 1985
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 - 10.2307/1241089
Subject(s) - fertilizer , production (economics) , maximization , profit (economics) , profit maximization , yield (engineering) , mathematics , economics , agricultural science , agricultural engineering , econometrics , statistics , environmental science , agronomy , mathematical optimization , microeconomics , engineering , materials science , metallurgy , biology
Abstract This paper demonstrates that low levels of fertilizer use on rainfed rice in the Philippines cannot be attributed to production risk. A random coefficient model estimated the objective probability distribution of yield. This was incorporated into a utility‐maximization framework to predict that moderately risk‐averse farmers would apply only seven to ten kilograms less than the profit‐maximizing N‐rate. Previous studies have established that risk was not a major impediment to fertilizer use in irrigated areas. This paper extends this conclusion to rainfed rice production in the Philippines.