Discussion Papers no. 186

Soil depletion choices under production and price uncertainty

This paper studies soil depletion incentives in a dynamic economic model under two different sources of revenue uncertainty (production- and output price risk). The focus is on the long-term effects of risk averse preferences. The land manager is assumed to posses three classes of instruments to control natural topsoil fertility over time. Each instrument is also assumed to have implications for expected short-run production. The analysis shows that the forces at play are different across the three agricultural activities considered and varies for the two sources of risk analysed. In order to predict how risk aversion may influence soil conservation incentives detailed information is needed about input use and cultivation practices and the farmers' perception of their risk implications. If higher output is associated with higher levels of soil degradation, risk averse preferences will strengthen the incentives for soil conservation under output price uncertainty, and the same outcome is likely under production uncertainty. If higher levels of outputs is associated with lower levels of soil degradation, risk averse preferences will induce a farmer to conserve less soil under output price uncertainty, while the likely outcome of production uncertainty is the opposite

Om publikasjonen

Tittel

Soil depletion choices under production and price uncertainty

Ansvarlig

Sverre Grepperud

Serie og -nummer

Discussion Papers no. 186

Utgiver

Statistics Norway, Research Department

Emne

Discussion Papers

Antall sider

35

Målform

Engelsk

Om Discussion Papers

Discussion papers comprise research papers intended for international journals and books. A preprint of a Discussion Paper may be longer and more elaborate than a standard journal article as it may include intermediate calculations, background material etc.

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