Uncertainty, Risk Aversion and Risk Management in Agriculture

Abstract

Abstract Uncertainty and risk are quintessential features in agriculture. After an overview of the main sources of agricultural risk, this paper tries to reveal whether farmer's decision is risk averse or not through census data, and then the elements which affect farmer’ s decision under risk so as to produce the efficiency o f crop planting,. This is followed by a basic analysis of farmer's decision on the selection of agricultural products under risk, including some comparative static results from stylized models. Selected empirical topics are surveyed, with emphasis on risk analyses as they pertain to production decisions at the farm level. We draw conclusion as follows: farmer's decision under risk can cause the increase of intercropping of the farm products and reduce the quantity of agricultural product the price of which fluctuates greatly, and farmer's decision under risk can also hinder the adoption of new agricultural technology. Finally, risk management is then discussed; we put forward some countermeasure of risk management and government interference which can help farmers to reduce the negative effects of farmer's decision under risk.