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Technological change and risk management: an application to the economics of corn production
Article first published online: 8 AUG 2005
Volume 29, Issue 2, pages 125–142, October 2003
How to Cite
Kim, K. and Chavas, J.-P. (2003), Technological change and risk management: an application to the economics of corn production. Agricultural Economics, 29: 125–142. doi: 10.1111/j.1574-0862.2003.tb00152.x
- Issue published online: 8 AUG 2005
- Article first published online: 8 AUG 2005
- Received 10 October 2001; received in revised form 16 April 2002; accepted 15 August 2002
- Technological change;
- Production risk;
- Downside risk;
The paper investigates the linkages between technological change and production risk, with an application to corn. The effects of technology on risk exposure are analyzed. We define technological progress to be risk-increasing (risk-decreasing) if it increases (decreases) the relative risk premium. The analysis is applied to panel data from Wisconsin research stations. Conditional moments (including mean, variance and skewness) of corn yield, grain moisture and corn profit are estimated for different sites. We investigate how the trade-off between expected return and the risk premium varies over time and over space. The empirical results indicate that technological progress contributes to reducing the exposure to risk as well as downside risk in corn production, although this effect varies across sites. They also stress the role of the relative maturity of corn hybrids as a means of managing risk.