Reductions of Agricultural Nitrogen Use Under Consideration of Production and Price Risks

Production and price risks affect optimal nitrogen use as well as the effects of nitrogen taxation if farmers’ risk aversion is taken into account. Our empirical analysis for Swiss maize production shows that risk-aversion leads to lower levels of nitrogen application, and nitrogen taxes lead to higher reductions of nitrogen use for risk-averse than for risk-neutral farmers. Moreover, risk-averse farmers face lower abatement costs. Sensitivity analyses, that consider expected shocks in price and yield variability in Swiss maize production, show that these differences between risk-averse and risk-neutral farmers will increase further. Thus, agricultural policies should consider farmers’ risk-preferences as well as potential increases in farmers’ income risks.

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 Record created 2017-04-01, last modified 2018-01-22

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