On the role of risk versus economies of scope in farm diversification with an application to ethiopian farms

Journal of Agricultural Economics

Volumn 63, Issue 1, 2012, Pages 25-55

  Chavas, Jean Paul ^a   Di Falco, Salvatore ^b  

^a UNIVERSITY OF WISCONSIN MADISON   (United States)

^b LONDON SCHOOL OF ECONOMICS   (United Kingdom)

Author keywords

Complementarity; Concavity; Diversification; Risk; Scale; Scope

Indexed keywords

AFROTROPICAL REGION; AGRICULTURAL DIVERSIFICATION; AGRICULTURAL LAND; AGRICULTURAL PRODUCTION; COMPLEMENTARITY; DECISION MAKING; ECONOMETRICS; ECONOMIC ANALYSIS; ECONOMIC DIVERSIFICATION; ECONOMY OF SCALE; INCENTIVE; INCOME DISTRIBUTION; RISK ASSESSMENT; SKEWNESS; TRADE-OFF; UNCERTAINTY ANALYSIS; VARIANCE ANALYSIS;

ETHIOPIA;

EID: 84855720402     PISSN: 0021857X     EISSN: 14779552     Source Type: Journal    
DOI: 10.1111/j.1477-9552.2011.00319.x     Document Type: Article

References (60)

1. Antle, J. M. Testing the stochastic structure of production: A flexible moment-based approach', Journal of Business and Economic Statistics, Vol. 1, (1983) pp. 192-201.
2. Antle, J. M. and Goodger, W. J. Measuring stochastic technology: The case of Tulare milk production', American Journal of Agricultural Economics, Vol. 69, (1987) pp. 509-522.
3. Arrow, K. J. Aspects of the Theory of Risk-Bearing. (Helsinki: Yrjo Jahnsson Saatio, 1965).
4. Barrett, C. B., Reardon, T. and Webb, P. Nonfarm income diversification and household livelihood strategies in rural Africa: Concepts, dynamics and policy implications', Food Policy, Vol. 26, (2000) pp. 315-331.
5. Battese, G. E. A note on the estimation of Cobb-Douglas production functions when some explanatory variables have zero values', Journal of Agricultural Economics, Vol. 48, (1997) pp. 250-252.
6. Baumol, W. J. On the proper cost tests for natural monopoly in a multiproduct industry', American Economic Review, Vol. 67, (1977) pp. 809-822.
7. Baumol, W. J., Panzar, J. C. and Willig, R. D. Contestable Markets and the Theory of Industry Structure (New York: Harcourt Brace Jovanovich, Inc., 1982).
8. Berger, P. G. and Ofek, E. Diversification's effects on farm value', Journal of Financial Economics, Vol. 37, (1995) pp. 39-65.
9. Berger, A. N., Hanweck, G. A. and Humphrey, D. B. Competitive viability in banking: Scale, scope and product mix economies', Journal of Monetary Economics, Vol. 20, (1987) pp. 501-520.
10. Blume, M. and Friend, I. The asset structure of individual portfolios and some implications for utility functions', Journal of Finance, Vol. 30, (1975) pp. 585-603.
11. Calvet, L. E., Campbell, J. Y. and Sodini, P. Down or out: Assessing the welfare cost of household investment mistakes', Journal of Political Economy, Vol. 115, (2007) pp. 707-747.
12. Campbell, J. Y. Household finance', Journal of Finance, Vol. 61, (2006) pp. 1553-1604.
13. Chambers, R. G., Chung, Y. and Färe, R. Benefit and distance functions', Journal of Economic Theory, Vol. 70, (1996) pp. 407-419.
14. Chavas, J. P. Risk Analysis in Theory and Practice (London: Elsevier Academic Press, 2004).
15. Chavas, J. P. and Aliber, M. An analysis of economic efficiency in agriculture: A nonparametric approach', Journal of Agricultural and Resource Economics, Vol. 18, (1993) pp. 1-16.
16. Cohn, E., Rhine, S. L. and Santos, M. C. Institutions of higher education as multi-product farms: Economies of scale and scope', Review of Economics and Statistics, Vol. 71, (1989) pp. 284-290.
17. De Groot, H., McMahon, W. W. and Volkwein, J. F. The cost structure of American research universities', Review of Economics and Statistics, Vol. 73, (1991) pp. 424-431.
18. Demeke, M., Kelly, V., Jayne, T. S., Said, A., LeValee, J. C. and Chen, H. 'Agricultural Market Performance and Determinants of Fertilizer Use in Ethiopia', Grain Market Research Project, Working paper No. 10 (Ethiopia: Addis Ababa, 1998).
19. Di Falco, S. and Chavas, J.-P. On crop biodiversity, risk exposure and food security in the highlands of Ethiopia', American Journal of Agricultural Economics, Vol. 91, (2009) pp. 599-611.
20. Ellis, F. The determinants of rural livelihood diversification in developing countries', Journal of Agricultural Economics, Vol. 51, (2000) pp. 289-302.
21. Evans, D. S. and Heckman, J. J. A test for subadditivity of the cost function with an application to the bell system', American Economic Review, Vol. 74, (1984) pp. 615-623.
22. Färe, R. and Grosskopf, S. Theory and application of directional distance functions', Journal of Productivity Analysis, Vol. 13, (2000) pp. 93-103.
23. Farrell, M. 'The measurement of productive efficiency', Journal of the Royal Statistical Society. Series A, General, Part 3, Vol. 120, (1957) pp. 253-281.
24. Fernandez-Cornejo, J., Gempesaw, C. M. II, Elterich, J. G. and Stefanou, S. E. 'Dynamic measures of scope and scale economies: An application to German agriculture', American Journal of Agricultural Economics Vol. 74, (1992) pp. 329-342.
25. Ferrier, G. D., Grosskopf, S., Hayes, K. J. and Yaisawarng, S. Economies of diversification in the banking industry', Journal of Monetary Economics, Vol. 31, (1993) pp. 229-249.
26. Freund, R. J. The introduction of risk into a programming model', Econometrica, Vol. 24, (1956) pp. 253-263.
27. Gebre Egziabher, T. B. 'Ethiopian vegetation: Past, present and future trends', in Proceedings of the Second International Symposium on the Flora of Ethiopia and Plants of Eastern and North Eastern Africa and Southern Arabia (Addis Ababa University, 1991).
28. Goetzmann, W. N. and Kumar, A. Equity portfolio diversification', Review of Finance, Vol. 12, (2008) pp. 433-463.
29. Gollier, C. The Economics of Risk and Time (Boston: The MIT Press, 2001).
30. Griffiths, W. E. and Anderson, J. R. Using time-series and cross-section data to estimate a production function with positive and negative marginal risks', Journal of the American Statistical Association, Vol. 77, (1982) pp. 529-536.
31. Hamermesh, D. S. and Pfann, G. A. Adjustment costs in factor demand', Journal of Economic Literature, Vol. 34, (1996) pp. 1264-1292.
32. Harlan, J. R. Crops and Man (Madison, Wisconsin: American Society of Agronomy, 1992).
33. Heady, E. O. Diversification in resource allocation and minimization of income variability', Journal of Farm Economics, Vol. 34, (1952) pp. 482-496.
34. Johnson, S. R. Reexamination of the farm diversification problem', Journal of Farm Economics, Vol. 49, (1967) pp. 610-621.
35. Just, R. E. and Pope, R. D. Production functions estimation and related risk considerations', American Journal of Agricultural Economics, Vol. 61, (1979) pp. 276-284.
36. Katchova, A. L. The farm diversification discount', American Journal of Agricultural Economics, Vol. 87, (2005) pp. 984-994.
37. Klette, T. J. R&D, scope economies and plant performance', Rand Journal of Economics, Vol. 27, (1996) pp. 502-522.
38. Lin, W., Dean, G. W. and Moore, C. V. An empirical test of utility vs. profit maximization in agricultural production', American Journal of Agricultural Economics, Vol. 56, (1974) pp. 497-508.
39. Luenberger, D. Microeconomic Theory (New York: McGraw-Hill, Inc., 1995).
40. Markowitz, H. Portfolio Selection: Efficient Diversification of Investment (New York: John Wiley & Sons, 1959).
41. Menezes, C., Geiss, G. and Tressler, J. Increasing downside risk', American Economic Review, Vol. 70, (1980) pp. 921-932.
42. Meyer, J. Two-moment decision models and expected utility', American Economic Review, Vol. 77, (1987) pp. 421-430.
43. Milgrom, P. and Roberts, J. The economics of modern manufacturing, technology, strategy and organization', American Economic Review, Vol. 80, (1990) pp. 511-528.
44. Misra, A. K., El-Osta, H. S. and Sandretto, C. L. Factors affecting farm enterprise diversification', Agricultural Finance Review, Vol. 64, (2004) pp. 151-166.
45. Mitton, T. and Vorkink, K. Equilibrium underdiversification and the preference for skewness', Review of Financial Studies, Vol. 20, (2007) pp. 1255-1288.
46. Mundlak, Y. On the pooling of time series and cross section data', Econometrica, Vol. 46, (1978) pp. 69-85.
47. Paul, C. J. M. and Nehring, R. Product diversification, production systems, and economic performance in U.S. agricultural production', Journal of Econometrics, Vol. 126, (2005) pp. 525-548.
48. Pope, R. D. and Prescott, R. Diversification in relation to farm size and other socio-economic characteristics', American Journal of Agricultural Economics, Vol. 62, (1980) pp. 554-559.
49. Pratt, J. W. Risk aversion in the small and in the large', Econometrica, Vol. 32, (1964) pp. 122-136.
50. Prior, D. Technical efficiency and scope economies in hospitals', Applied Economics, Vol. 28, (1996) pp. 1295-1301.
51. Samuelson, P. A. General proof that diversification pays', Journal of Financial and Quantitative Analysis, Vol. 2, (1967) pp. 1-13.
52. Smale, M., Hartell, J., Heisey, P. W. and Senauer, B. The contribution of genetic resources and diversity to wheat production in the Punjab of Pakistan', American Journal of Agricultural Economics, Vol. 80, (1998) pp. 482-493.
53. Tillman, D. and Kareiva, P. M. Spatial Ecology: The Role of Space in Population Dynamics and Interspecific Interactions (Princeton, NJ: Princeton University Press, 1997).
54. Tobin, J. Liquidity preference as behavior toward risk', Review of Economic Studies, Vol. 67, (1958) pp. 65-86.
55. Topkis, D. M. Supermodularity and Complementarity (Princeton, NJ: Princeton University Press, 1998).
56. Unruh, J. D. 'The dilemma of African agrobiodiversity: Ethiopia and the role of food insecurity in conservation', in Proceedings of the International Symposium Managing Biodiversity in Agricultural Ecosystems (Canada: Montreal, November 2001).
57. Vavilov, N. I. The origin, variation, immunity breeding of cultivated plants. Translated from the Russian by K. S. Chester', Chronica Botanica, Vol. 13, (1951) pp. 1-364.
58. Willig, R. D. Multiproduct technology and market structure', American Economic Review, Vol. 69, (1979) pp. 346-351.
59. Wooldridge, J. M. Econometric Analysis of Cross Section and Panel Data (Cambridge, MA: MIT Press, 2002).
60. World Bank. Ethiopia: Risk and Vulnerability Assessment. Report No. 26275-ET (Washington, DC: World Bank, 2005).