Adopting bioenergy crops: Does farmers’ attitude toward loss matter?

Mohit Anand, Ruiqing Miao, Madhu Khanna

Research output: Contribution to journalArticle

Abstract

We apply prospect theory to examining farmers’ economic incentives to divert a share of their land to bioenergy crops (miscanthus and switchgrass in this study). Numerical simulation is conducted for 1,919 rain-fed U.S. counties to identify the impact of loss aversion on bioenergy crop adoption, and how this impact is influenced by biomass price, discount rate, credit constraint status, and policy instruments. Results show that ignoring farmer's loss aversion causes overestimation of miscanthus production but underestimation of switchgrass production, particularly when farmers are credit constrained and have a high discount rate. We find that establishment cost subsidy induces more miscanthus production whereas subsidized energy crop insurance induces more switchgrass production. The efficacy of these two policy instruments, measured by biomass production increased by per dollar of government outlay, depends on the magnitude of farmers’ loss aversion and discount rate.

Original languageEnglish (US)
Pages (from-to)435-450
Number of pages16
JournalAgricultural Economics (United Kingdom)
Volume50
Issue number4
DOIs
StatePublished - Jul 2019

Keywords

  • D81
  • Q15
  • Q16
  • bioenergy crops
  • crop insurance
  • establishment cost
  • loss aversion
  • miscanthus
  • prospect theory
  • switchgrass

ASJC Scopus subject areas

  • Agronomy and Crop Science
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'Adopting bioenergy crops: Does farmers’ attitude toward loss matter?'. Together they form a unique fingerprint.

Cite this