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A Household Model of On‐Farm Storage Under Price Risk
Author(s) -
Saha Atanu,
Stroud Janice
Publication year - 1994
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 - 10.2307/1243663
Subject(s) - commodity , consumption (sociology) , price risk , economics , risk aversion (psychology) , agriculture , food security , panel data , agricultural economics , expected utility hypothesis , financial economics , econometrics , futures contract , finance , ecology , social science , sociology , biology
We present an agricultural household model of consumption, storage, savings, and labor decisions and argue that food crop storage under price risk cannot be fully explained by “risk taking” or speculative behavior alone, as the commodity storage literature suggests. Often, and especially in the case of small farmers, the explanation lies in the household's aversion to risk and in food security considerations. The empirical analysis, using ICRISAT quarterly panel data from Shirapur, provides evidence against risk‐neutral preferences. We find that risk response is particularly significant in the storage and labor decisions of small farm households.