IN DEFENSE OF FENCE TO FENCE: CAN THE BACKWARD BENDING SUPPLY CURVE EXIST?

Politicians dealing with the "farm problem" sometimes lament that output increases when prices go up and when prices go down. This article presents three possible theoretical explanations. In the first, farmers deplete soil (over-farm) when prices are low and imperfect capital markets prevent borrowing. In the second, farmers in financial stress (low prices) allocate more family labor to farming to meet debt-repayment constraints. In the third, wealth held in farmland tends to decline as prices decline. With decreasing absolute risk aversion, this increases risk aversion which, in extreme cases, causes negative supply response.


Subject(s):
Issue Date:
1992-12
Publication Type:
Journal Article
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/30945
PURL Identifier:
http://purl.umn.edu/30945
Published in:
Journal of Agricultural and Resource Economics, 17, 2
Page range:
277-285
Total Pages:
9




 Record created 2017-04-01, last modified 2020-10-28

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