The Effects of Relative or Absolute Risk Aversion on Production Efficiency in Agriculture: Evidence from the 'Bread Basket' of Nigeria

36 Pages Posted: 25 Aug 2014 Last revised: 3 May 2017

Date Written: May 2, 2017

Abstract

I estimate stochastic frontier models for agricultural productivity using factors that proxy for absolute risk aversion (e.g. loan amounts) and factors that proxy for relative risk aversion (loan pricing or interest rates). Empirical findings show absolute risk aversion ceases to matter for agricultural productivity or the determination of the productivity frontier in models that incorporate both loan amounts and loan interest rates. Empirical findings provide evidence that interactions between capital and productivity within agricultural sectors are best studied within context of capital constraints and existence of or imposition of minimum required returns on capital, as opposed to a focus on loan financing amounts.

Keywords: Agriculture Financing, Peasant Farmers, Output, Productivity, Risk Aversion, Interest Rates, Credit Rationing

JEL Classification: Q12, Q14

Suggested Citation

Obrimah, Oghenovo A., The Effects of Relative or Absolute Risk Aversion on Production Efficiency in Agriculture: Evidence from the 'Bread Basket' of Nigeria (May 2, 2017). Available at SSRN: https://ssrn.com/abstract=2486431 or http://dx.doi.org/10.2139/ssrn.2486431

Oghenovo A. Obrimah (Contact Author)

FISK University ( email )

1000 17th Ave N
Nashville, TN TN 37208-3051
United States
4049404990 (Phone)

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