Four Essays on Farmers’ Behavior when Making Insurance, Grazing, and Seed Decisions in the Face of Uncertainty

• Main Author: Che, Yuyuan
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01-01-2021
• Subjects: Agricultural economics; Agriculture; Behavioral Sciences; Economics; Environmental economics
• ISBN: 9798538124190

Decision-makers typically encounter at least some difficulties when making decisions about managing uncertain future outcomes. Traditional economic theory assumes that individuals seek to maximize expected profits or expected utility based on their available information. However, many studies have shown that these assumptions are violated in some cases, especially when people countenance uncertainty. Agricultural producers cannot avoid uncertainty about weather conditions, market fluctuations, and the effectiveness of technology choices when making important production decisions. A central theme of this dissertation is how agricultural producers make decisions with a particular focus on behavioral factors. The dissertation consists of four essays on farmers’ decisions regarding crop insurance, rotational grazing, and seeding rates.The first essay explores whether and how farmers’ crop insurance participation decisions are influenced by recent indemnity or weather events using historic federal crop insurance program data. With parametric and non-parametric methods, we find that higher past indemnities encourage farmers to participate in insurance programs and choose a higher coverage level, while prior adverse weather shocks work indirectly. We also find that the increase in participation due to indemnities peaks in the year following a loss.The second and third essays investigate how ranchers make decisions about whether to adopt rotational grazing practices. The second essay focuses on peer effects and subsidy impacts. With farm-level survey data, we apply a simultaneous-equations model to take account of endogeneity issues arising from peer effects. We find that there are significant peer effects in the adoption of rotational grazing, and that incentive policies will have multiplier effects in the long run on adoption through peer networking. The third essay investigates why ranchers who view rotational grazing as a win-win practice for both profit and the environment do not use the practice.The fourth and final essay studies how farmers’ seeding rate choices respond to markets, resources, and technologies by considering a trade-off between more seeds and fewer resources allocated to each seed. Trends in seeding rates have differed between corn and soybean over the past several decades, but the underlying reasons for this have not received attention in the agronomic and economic literature. With a unique detailed U.S. farm-level market data, we find that soybean seeding rate choice is more price elastic than is that for corn, i.e., seed companies are likely to have less power in the soybean seed market. Most inputs that come with the land, and so are divided across all seeds increase corn and soybean seeding rates; while inputs that come with the seed increase corn seeding rates and decrease soybean seeding rates. As an application, we combine findings in the literature with our empirical analysis to conclude that tax or price policies that target the seed or crop will mitigate neonicotinoid-related ecological impacts.