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Uncertain Yields in Sectoral Welfare Analysis: An Application to Global Warming

Published online by Cambridge University Press:  28 April 2015

D.K. Lambert ,
B.A. McCarl ,
Q. He ,
M.S. Kaylen ,
W. Rosenthal ,
C.C. Chang  and
W.I. Nayda
D.K. Lambert
Affiliation:
Departments of Agricultural Economics at theUniversity of Nevada, Reno
B.A. McCarl
Affiliation:
Texas A&M University
Q. He
Affiliation:
Texas A&M University
M.S. Kaylen
Affiliation:
University of Missouri, Columbia
W. Rosenthal
Affiliation:
Blackland Research Center of Texas Agricultural Experiment Station, Temple, Texas
C.C. Chang
Affiliation:
The Institute of Economics, Nankang, Taipei, Taiwan
W.I. Nayda
Affiliation:
Texas A&M University
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Abstract

Agriculture operates in an uncertain environment. Yields, prices, and resource usage can change dramatically from year to year. However, most analyses of the agricultural sector, at least those using mathematical programming methods, assume decision making is based on average yields, ignoring yield variability. This study examines how explicit consideration of stochastic yield outcomes influence a sector analysis. We develop a model that can be used for stochastic sector analysis. We extend the risk framework developed by Hazell and others to incorporate discrete yield outcomes as well as consumption activities dependent upon yield outcomes. An empirical application addresses a comparison between sector analysis with and without considerations of the economic effects of yield variability in a global warming context.

Keywords

agricultural sector analysisglobal warmingpartial equilibrium modelsstochastic programming.
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 27 , Issue 2 , December 1995 , pp. 423 - 436
Copyright
Copyright © Southern Agricultural Economics Association 1995

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