Uncertainty and risk aversion : implication for Tunisian cereals crops

Abstract EN

The main aim of this paper is to give the key features for the estimation of production structures using dual approach and to assess risk prevalence in agricultural activity.

A supply / demand model, based on profit function in which land allocation is set endogenous and conditional on net put prices, is implemented within a dual approach.

Aggregated data from Tunisian cereal crops sector are used.

Results showed low price elasticity’s of supply.

In order to modelize risk non-neutrality into the implemented dual approach, Mean-Variance utility function of profit is introduced thereafter as the objective function for the producer’s optimization process (rather than profit).

Uncertainty was set as a consequence of a weather variable variance; and randomness of output quantities were set endogenous and conditional on weather variable variance as suggested by Just and Pope (1978) and Coyle (1999).

The coefficient of risk aversion was significant; and results from the Mean-Variance model show several salient results relative to both weather and yield variability.

The average Risk premium during the sample period was equal to 13.58 percent.