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 language | English (US) |
|---|---|
| Pages (from-to) | 435-450 |
| Number of pages | 16 |
| Journal | Agricultural Economics (United Kingdom) |
| Volume | 50 |
| Issue number | 4 |
| DOIs | |
| State | Published - Jul 2019 |
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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
Cite this
Adopting bioenergy crops : Does farmers’ attitude toward loss matter? / Anand, Mohit; Miao, Ruiqing; Khanna, Madhu.
In: Agricultural Economics (United Kingdom), Vol. 50, No. 4, 07.2019, p. 435-450.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Adopting bioenergy crops
T2 - Does farmers’ attitude toward loss matter?
AU - Anand, Mohit
AU - Miao, Ruiqing
AU - Khanna, Madhu
PY - 2019/7
Y1 - 2019/7
N2 - 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.
AB - 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.
KW - D81
KW - Q15
KW - Q16
KW - bioenergy crops
KW - crop insurance
KW - establishment cost
KW - loss aversion
KW - miscanthus
KW - prospect theory
KW - switchgrass
UR - http://www.scopus.com/inward/record.url?scp=85067391687&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85067391687&partnerID=8YFLogxK
U2 - 10.1111/agec.12501
DO - 10.1111/agec.12501
M3 - Article
AN - SCOPUS:85067391687
VL - 50
SP - 435
EP - 450
JO - Agricultural Economics
JF - Agricultural Economics
SN - 0169-5150
IS - 4
ER -