UNCERTAIN YIELDS IN SECTORAL WELFARE ANALYSIS: AN APPLICATION TO GLOBAL WARMING

Agriculture operates in an uncertain environment. Yields, prices, and resource usage can change dramatically from year to year. However, most analyses of the agricultural sector, at least those using mathematical programming methods, assume decision making is based on average yields, ignoring yield variability. This study examines how explicit consideration of stochastic yield outcomes influence a sector analysis. We develop a model that can be used for stochastic sector analysis. We extend the risk framework developed by Hazell and others to incorporate discrete yield outcomes as well as consumption activities dependent upon yield outcomes. An empirical application addresses a comparison between sector analysis with and without considerations of the economic effects of yield variability in a global warming context.


Issue Date:
1995-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/15257
Published in:
Journal of Agricultural and Applied Economics, Volume 27, Number 2
Page range:
423-436
Total Pages:
14




 Record created 2017-04-01, last modified 2017-08-23

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