Impacts of Risk Aversion on Whole-Farm Management in Syria
David J. PANNELL* and Thomas L. NORDBLOM**
*Agricultural and Resource Economics, University of Western Australia, Nedlands 6907, Australia
**ICARDA, Aleppo, Syria
The agricultural environments of Syria and southern Australia are similar, particularly in the degree of climatic variability that farmers face. This paper reports on a study of the impact of risk on farm management practices in northern Syria, focusing particularly on how management practices are affected by risk aversion and farm size. The study is based on production data from an eight-year field trial in northern Syria and on prices from market surveys over the same period. A large linear programming model is built, representing the eight years as observations from a discrete probability distribution. Risk aversion is modelled by inclusion of a utility function with constant relative risk aversion, represented using the DEMP/UEP approach. It is found that in this farming system, it is possible to avoid a large part of the potential risk with little reduction in expected farm income. The impacts of risk aversion on farm plans are found to be highly sensitive to farm size. Results are compared with a simpler EV approach, and major differences are revealed.
Citation: Pannell, D.J. and Nordblom, T.L. (1998). Impact of risk aversion on whole-farm management in Syria. Australian Journal of Agricultural and Resource Economics. 42(3): 227-247.