This paper analyses the effect of world price instability on the agricultural supply from developing countries and determines to what extent this effect is dependent upon the macroeconomic environment. Producers from agricultural commodityexporting countries are particularly vulnerable to the fluctuations of world prices: they are widely exposed to price shocks and have little ability to cope with them. Nevertheless, the effectiveness of risk-coping strategies is conditioned by the influence of macroeconomic factors (infrastructure, inflation and financial deepening). Thus country-specific price indices are established, and the response of production indices to price instability indices is estimated by using a panel model including macroeconomic variables which interact with price instability. Such analysis is based on a sample of 25 countries between 1961 and 2002. The results highlight a significant negative effect of the world price instability on supply, and further show that high inflation, weak infrastructure and a poorly developed financial system exacerbate this effect.

Constraints on production economic research are examined in three dimensions: problem focus, methodology, and data availability. Data availability has played a large role in the choice of problem focus and explains some misdirected focus. A proprosal is made to address the data availability constraint. The greatest self-imposed constraints are methodological, Production economics bas focused on flexible representations of technology at the expense of specificity in preferences. Yet some of the major problems faced by decision makers relate to long-term problems, e.g., the commodity boom and ensuing debt crisis of the 1970s and 1980s where standard short-term profit maximization models are unlikely to capture the essence of decision maker concerns, The purpose of this paper is to examine the econ-ometric underpinnings and empirical practicality of today’s approaches to empirical analysis of ag-ricultural production. I argue that agricultural economists are not fulfilling opportunities to un-cover knowledge about agricultural production.

verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. 1

In modelling farm systems it is widely accepted that risk plays a central role. Furthermore, farmers ’ risk aversion determines their decisions in both the short and the long run. This paper presents a methodology based on multiple criteria mathematical programming to obtain relative and absolute risk aversion coefficients. We rely on multiattribute utility theory (MAUT) to elicit a separable additive multiattribute utility function and then estimate the risk aversion coefficients and apply this methodology to an irrigated area of Northern Spain. The results show a wide variety of attitudes to risk among farmers, who mainly exhibit decreasing absolute risk aversion (DARA) and constant relative risk aversion (CRRA).

This article reviews two major approaches used in the past for risk analysis-the expected utility approach and the use of safety rules-and endeavors to reconcile their applicability and use in light of the recent nonexpected utility risk literature and work using the mean-Gini coefficient for risk analysis. This leads to the identification of several "reduced form " hypotheses that hold under a variety of theoretical structures and to a discussion of some empirical evidence regarding these hypotheses. The major lesson of recent research of individual behavior under risk is that it is not always consistent with the expected utility approach; in short, there is no generic model for evaluating behavior under risk. Key words: expected utility, multiattribute utility, safety rules.

This paper studies the extent to which decoupled income support measures in agriculture can have production implications both at the extensive and intensive margins. We develop a theoretical framework that analyzes production responses of agricultural producers to apparently decoupled payments, by explicitly considering risk attitudes and uncertainty. We use farm-level data collected in Kansas to estimate the model. Technology and risk preference parameters are jointly estimated. Results show that though lump sum payments are not fully decoupled in the presence of risk and uncertainty, their effects on agricultural production are likely to be of a very small magnitude.

This analysis utilizes farm-level data to evaluate the extent to which U.S. farm program bene¯ts, particularly the AMTA and market loss assistance payments, bring about distortions in production. The issue is important in light of the upcoming WTO negotiations and debate over the distortionary e®ects of such decoupled (\green-box") payments. We consider a variety of empirical models intended to evaluate various aspects of the distortion question. Our results generally suggest that the distortions brought about by AMTA payments, though statistically signi¯cant, are quite modest. However, market loss assistance payments do bring about larger statistically signi¯cant e®ects and may have resulted in more production of corn and less production of soy-beans. Probit models of the land acquisition decision suggest that AMTA payments may raise the likelihood that agents will acquire more land, though again the e®ect is modest and does not necessarily imply that production is distorted. Our results are reinforced using an aggregate county level acreage model. ¤Goodwin is Andersons Professor at the Ohio State University. Mishra is an economist with the Economic Research Service. This research was supported by the Andersons Endowment, the OARDC, and the OECD. We bene¯ted signi¯cantly from extensive discussions with Carl Zulauf and helpful comments from Teresa Serra. Views, opinions, and conclusions are the authors ' alone and do not re°ect those of the USDA or other

It's a commonplace observation that risk-averse farmers ought to prefer less risk. In this paper, we provide three qualifications to this commonplace. First, we note that (properly defined) "less risk" need not imply "smaller variance." Second, we note that when farmers produce under contract, there may be an important tension between risk and incentives, and we provide a simple characterization of the optimal risk in any production system. Third, we note that while at the margin the behavior of risk-averse farmers may appear to be nearly risk-neutral, it does not follow that one can generally treat such producers "as if" they were risk-neutral without being greatly led astray.

Diverse instruments have been used to encourage developing agriculture. In the process, billions of dollars have been spent on providing incentives to peasants. Given scarce resources, an important concern has been the issue of what policy instruments to emphasize. In this regard, useful policy information can be gleaned from the role of expected profits (revenue and input prices), assets (irrigation and infrastructure), and relevant risks, in evoking peasant response. Using panel data for the period 1967-68/1999-00 pertaining to 7 major Indian cash crops cultivated across 13 major states, we find strong evidence of a differential producer response in the post-liberalization phase, although the important variables per se are much the same. Our results suggest that the preferred policy ought to emphasize availability of irrigation, affordable fertilizer, and rural infrastructure, rather than incessant increases in output prices.

The impacts of introducing a partial price stabilization scheme in the U.S. corn market are investigated by using a modified version of the bounded price variation model. Specifically, a model is developed and estimated that includes rational expectations of the first three central moments of the (truncated) equi-librium price distribution. The estimated model is used to simulate market equilibrium effects of introducing upper and lower price limits through a tax-subsidy scheme. The results show that corn producers are downside risk averse, and that market feedback effects of price stabilization can, at times, be more important than direct effects. Key words: downside risk aversion, price stabilization, rational expectations equilibrium.