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Modeling Risk Behavior of Agricultural Production in Chinese Small Households

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  • Lu, Wencong C.
  • Xi, Aiqin
  • Ye, Jian

Abstract

This paper analyzed Chinese small-scale farmer's response to agricultural risks by using MOTAD model. Based on the household's data from the two villages Wangjia and Damao in Zhejiang province, we established "representative rural household" for each of the sampling villages. The results show that farmers in Zhejiang are quite sensitive to agricultural risks. However, different farming systems, the ratio of agricultural income to total family income, as well as the size of arable land, differentiates their risk response. The decision maker's risk preference not only affects the type of agricultural activities and corresponding scales they selected, but also have further effects on the micro agricultural production structure and stable growth of household's income. Given the amount of productive resources such as arable land, capital and labor force, the combination of production activities with a higher level of expected income/risk would be selected if the decision maker is willing to take risks. In a higher level of risks, capital is invested prior to manpower, implying that the latter has a much higher opportunity cost. For those combinations with a lower risk level, diversification might reduce risks to some extent at a cost of total return. Current agriculture structure needs to be adjusted and improved.

Suggested Citation

  • Lu, Wencong C. & Xi, Aiqin & Ye, Jian, 2006. "Modeling Risk Behavior of Agricultural Production in Chinese Small Households," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia 25656, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae06:25656
    DOI: 10.22004/ag.econ.25656
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    References listed on IDEAS

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    1. Perry, Janet E. & Johnson, James D., 2000. "Influences Of Human Capital And Farm Characteristics On Farmers' Risk Attitudes," 2000 Producer Marketing and Risk Management Conference, January 13-14, Orlando, FL 19581, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Eihab Fathelrahman & Mohamed Gheblawi & Safdar Muhammad & Emily Dunn & James C. Ascough & Timothy R. Green, 2017. "Optimum Returns from Greenhouse Vegetables under Water Quality and Risk Constraints in the United Arab Emirates," Sustainability, MDPI, vol. 9(5), pages 1-11, April.
    2. Edison, Andy Mulyana & Jie, Ferry & Parton, Kevin A., 2011. "The Analysis Of Supply Response Of Rice Under Risk In Jambi Province," 2011 Conference (55th), February 8-11, 2011, Melbourne, Australia 113736, Australian Agricultural and Resource Economics Society.

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      Keywords

      Farm Management; Risk and Uncertainty;

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