Gudbrand Lien

Research Professor

(+47) 612 88 160
gudbrand.lien@nibio.no

Place
Oslo

Visiting address
Storgata 2-4-6, 0155 Oslo

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Abstract

We investigated whether diversification and/or structural change would improve Norwegian agriculture. Using a flexible technology approach to account for different technologies, we assessed economies of scope and scale of dairy and cropping farms, including regional differences. We fitted translog cost functions to farm-level panel data for the period 1991–2014. We found both economies of scope and scale on the farms. Dairy farms have an economic incentive to integrate dairying with cropping in all regions of Norway, and vice versa. Thus, policy makers should eschew interventions that inhibit diversification or structural change and that increase the costs of food production.

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Abstract

Purpose – The purpose of this paper is to explore the economic performance of Norwegian crop farms using a stochastic frontier analysis. Design/methodology/approach – The analysis was based on a translog cost function and unbalanced farm-level panel data for 1991–2013 from 455 Norwegian farms specialized in crop production in eastern and central regions of Norway. Findings – The results of the analysis show that the mean efficiency was about 78–81 percent. Farm management practices and socioeconomic factors were shown to significantly affect the economic performance of Norwegian crop farms. Research limitations/implications – Farmers are getting different types of support from the government and the study does not account for the different effects of different kinds of subsidy on cost efficiency. Different subsidies might have different effects on farm performance. To get more informative and useful results, it would be necessary to repeat the analysis with less aggregated data on subsidy payments. Practical implications – One implication for farmers (and their advisers) is that many of them are less efficient than the estimated benchmark (best performing farms). Thus, those lagging behind the best performing farms need to look at the way they are operating and to seek out ways to save costs or increase crop production. Perhaps there are things for lagging farmers to learn from their more productive farming neighbors. For instance, those farmers not practicing crop rotation might be well advised to try that practice. Social implications – For both taxpayers and consumers, one implication is that the contributions they pay that go to subsidize farmers appear to bring some benefits in terms of more efficient production that, in turn, increase the supply of some foods so possibly making food prices more affordable. Originality/value – Unlike previous performance studies in the literature, the authors estimated farm-level economic performance accounting for the contribution of both an important farm management practice and selected socioeconomic factors. Good farm management practices, captured through crop rotation, land tenure, government support and off-farm activities were found to have made a positive and statistically significant contribution to reducing the cost of production on crop-producing farms in the Central and Eastern regions of Norway.

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This paper addresses the endogeneity of inputs and output (which is mostly ignored in the stochastic frontier (SF) literature) in the SF panel data model under the behavioural assumption that firms maximize returns to the outlay. We consider a four component SF panel data model in which the four components are: firms' latent heterogeneity, persistent inefficiency, transient inefficiency and random shocks. Second, we include determinants in transient inefficiency. Finally, to avoid the impact of distributional assumptions in estimating the technology parameters, we apply a multi-step estimation strategy to an unbalanced panel dataset from Norwegian crop-producing farms observed from 1993 to 2014. Distributional assumptions are made in second and third steps to predict both persistent and transient inefficiency, and their marginal effects. Keywords Efficiency; Endogeneity; Returns to the outlay; Panel data

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Abstract

This paper compares technical efficiencies (TEs) and technological gap ratios (TGRs) for dairy farms in regions of Norway, accounting for differences in working environments. We used the state-of-the-art stochastic meta-frontier approach to estimate TEs and TGRs to account for regional heterogeneity, and the ‘true’ random-effect model to account for farm effects. The dataset used was farm-level balanced panel data for 24 years (1992–2014), with 5442 observations from 731 dairy farms. The results of the analysis provide empirical evidence of small regional differences in TEs, TGRs, and input use. Furthermore, the results may provide support for the more regionally specific agricultural policy, in terms of support schemes and structural regulations.

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Abstract

In this paper we estimate the short-run, long-run and overall efficiency of Norwegian electricity distribution companies for the period 2000–2013 controlling for both noise and company effects. Short-run inefficiency is the part of inefficiency that is allowed to adjust freely over time for each company, but long-run (persistent) inefficiency remains constant over time, although it is allowed to vary across companies. For robustness check we also consider two additional models in which either company effects are not controlled or these are treated as inefficiency. The production technology is represented by a translog input distance function in all three models. We find that technical change and returns to scale are quite robust across the models. However, the efficiency scores across the three models we consider are not correlated strongly. We conclude that the regulators and practitioners should take extra caution in using the proper model in practice, especially when the efficiency measures are used to reward/punish companies through incentives for better performance.

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Empirical studies have often shown wide differences in productivity among firms. Although several studies have sought to identify factors causing such differences, only a few studies have examined the effects of risk and risk aversion on productivity. In this study, using Norwegian dairy farming data for 2009, we examined the effects of different aspects of risk on productivity. We used a range of variables to construct indices of risk taking, risk perception and risk management. These indices were then included as arguments in an input distance function which represents the production technology. Our results show that these risk indices did affect productivity. Regional differences in productivity, though small, were also found to exist, suggesting that unobserved edaphic factors that differ between regions also affected productivity.

Abstract

Protected Landscapes (PLs) are increasingly used in Norway to conserve cultural (human modified) landscapes. In many cases the maintenance of agricultural activities in PLs is required to preserve landscape character. Whilst research exists on land conservation policies in general, the particular effects of PL on management and adjustment of the farms involved have not received attention in the literature. We present results from a questionnaire sent to owners of agricultural land within PLs in Norway. Whilst landowners were divided upon the effects of PLs on farm management, the economic situation of the farm was little affected. Furthermore, changes in farm management after the establishment of a PL did not seem to have been driven by the establishment of the PLs per se. Most importantly, farm management changes were related to potential options to develop the farm and its land. A statistical model showed that PL-farms did not differ significantly from farms outside PL in the development of their land use or animal husbandry. Our findings thus indicate that the establishment of PL played a minor role as a driving force of changes in farm management and farm income.

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The objective of tills article wits to explore how marginalization of revenues front timber sales relative to income from agriculture and employment affects profit efficiency (the ratio of actual profit to maximum obtainable profit). We also sought to identify and measure the effects of other relevant inefficiency factors. A translog profit. frontier function with all inefficiency module was estimated using a panel of 2.265 observations of 385 active Norwegian forest. owners for 1991-2004. We found that profit efficiency decreases as the revenues from timber sales fall relative to agricultural or wage income. Other factors decreasing the efficiency were logging distance (beyond what can be explained by logging costs), fragmentation of the forest property, and time. Factors increasing profit efficiency were experience (age). information (possession of a management. plan). and geographical location (centrality). Oil the basis of our results we make recommendations oil how forest owners can improve their profit. efficiency. We also suggest further developing and streamlining contract regimens as policy instruments for promoting efficiency. FOR. SCI. 55(6).524-532.

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A sample selection framework that simultaneously takes into account the two-step decision-making of forest owners (first whether or not to harvest, second the level of harvesting) is applied on representative cross-sectional data for forest properties and owners in Norway. Forest management plans, property size, forested area and income from agriculture are found to increase both the propensity to harvest and the harvesting levels. Income from engagement in other outfield-related productions and debt burden increase the propensity to harvest only, while increased age impact negatively on the harvesting decision. Wage income affects both propensities to harvest and harvesting levels negatively. The results suggest that other on-property productions may stimulate harvesting decisions, while off-property income impact harvesting decisions and levels negatively. (C) 2007 Elsevier GmbH. All rights reserved.

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Abstract

Quota regulations that prevent output expansion of farms and reallocation of output between farms can cause lower growth in output and productivity. The aim of this study was to explain the output growth rate of Norwegian dairy farms since 1976, and to decompose it into output, input, socioeconomic and technical change components. Instead of using the standard distance function approach for multi-output technologies, we use a growth rate formulation, which automatically removes the farm-specific effects. This formulation also helps to impose non-negativity constraints on marginal products of inputs (input elasticities), which are often violated for many observations, especially when flexible functional forms are used. The farm-level panel data cover three periods: before the quota scheme was introduced (1976-1982); the period with the most output-restricting quota scheme (1983-1996); and the period with a more flexible quota scheme (from 1997 onwards). Results show that the milk quota regulations had a significant constraining effect on output growth, in particular on milk output in the period 1983-1996. Furthermore, the output mix has shifted towards meat production for the average farm. What emerges from this study is that output growth and technical change are negatively influenced by policy aims where productive performance has not been the primary objective, and that there is scope for increased farm growth if the quota regime is liberalised.

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This paper presents empirical insight into part-time and full-time property owners’ perceptions of risk and risk management strategies. In addition, the relationships between forest owners with varying degree of off-property work and property and forest owner characteristics, risk perceptions, risk management strategies and harvesting behaviour are examined. The data originate from a questionnaire responded to by forest owners in eastern Norway which were merged with 9 years of logging data. Timber price variability and institutional risks were perceived as primary sources of risk. Use of advisers from the forest owners’ association, buying personal insurance and off-property work were perceived as the most important ways to handle risk. The results show that off-property work affects to a lesser degree what forest owners perceived as important risk sources, but that risk perceptions affect to a stronger degree the ways in which risk was dealt with. The chosen risk management strategies influenced the forest owner's harvesting behaviour to some extent, but more research on the issue is needed to clarify the relationship. There was a positive relationship between owners with off-property activities and their performance as timber suppliers. Several measures, such as improved rural education, revision of some of the arrangements that regulate property mergers and support measures for increased on-property diversification may increase annual timber harvesting and reduce variability in harvesting level.

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Abstract

In Norway, as in many other European countries, income from forestry has become marginal to owners? household economies and most employment of forest-owner households is now undertaken off the property. Also, many forest owners have focused increasingly on other revenue-earning activities on their properties, such as providing recreational services. It is a challenge in all kinds of production to find the optimal way of converting inputs into outputs, i.e., to be technically efficient. Extent of financial dependency on income from forestry differs between part-time and full-time forest owners. Since the two groups have different livelihood strategies, it is plausible that full-time forest owners have more professional forest management practices. Data for a cross-section of 3,249 active (i.e., harvesting) forest owners were extracted from the 2004 Sample Survey of Agriculture and Forestry representing the year 2003. A stochastic production frontier analysis was applied to evaluate forest management efficiency impacts of important factors including property and owner characteristics, outfield-related and agricultural activities, off-property income and geographical location in central or remote areas. It was found that many forest owners are technically inefficient, and there exist opportunities for improved performance. Off-property income was found to have an estimated negative impact on technical efficiency, the inefficiency arising (weakly) with increasing share of household incomes from outfield activities, and properties in urban centred areas are less efficient than those in remote areas. One policy implication of the study is that a potentially substantial efficiency increase might be achieved from allowing small inefficient woodlots to merge into larger units of forestry production. Also, providing support for forest management plans may improve efficiency.

Abstract

Målet med denne studien var å jamføre risikoen for økologiske, integrerte og convensjonelle dyrkingssystem. Forsøksdata frå eit dyrkingssystem (1991-1999) på Austlandet vart brukte saman med budsjettal frå gardsbruk. Empirisk fordeling av nettoinntekt for ulike dyrkingssystem vart estimert ved hjelp av ein simuleringsmodell. Resultata syner at det økologiske systemet hadde størst variasjon i nettoinntekt, men med gjeldane tilskotsordningar og meirprisar for økologiske varer vert dette det mest økonomiske alternativet.

Abstract

Conventional farmers converting to organics have contributed to most of the rapid expansion of organic farming in recent years. The new organic farmers may differ from their more established colleagues, which may have implications for the development of the organic farming sector and its distinctiveness vis-a-vis conventional production and marketing practices. The aim of this study was to explore Norwegian organic dairy farmers' personal and farm production characteristics, farming goals, conversion motives, and attitudes to organic farming, grouped by year of conversion (three groups). A postal survey was undertaken among organic dairy farmers (n=161). The results show that the newcomers (converted in 2000 or later) were less educated than the early entrants (the so-called 'old guard') who converted in 1995 or earlier. The frequency of activities like vegetable growing and poultry farming among the old guard was high. The late-entry organic herds were fed with more concentrates and had a higher milk production intensity, showed a higher incidence of veterinary treatments and less frequent use of alternative medicine than the herds of the two earlier converting groups. For all groups of farmers, the highest ranked farming goals were sustainable and environment-friendly farming and the production of high-quality food. Late entrants more often mentioned goals related to profit and leisure time. On average, the most frequently mentioned motives for conversion were food quality and professional challenges. The old guard was more strongly motivated by food quality and soil fertility/pollution issues than the others, whereas financial reasons (organic payments included) were relatively more important among the newcomers. All groups held very favorable views about the environmental qualities of organic farming methods, albeit with different strengths of beliefs. Even though trends towards more pragmatic and business-oriented farming were found, the majority of the newcomers were fairly committed.

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Abstract

This study was conducted to explore organic and conventional dairy farmers' perceptions of risk and risk management, and to examine relationships between farm and farmer characteristics, risk perceptions, and strategies. The data originate from a survey of conventional (n=363) and organic (n=162) dairy farmers in Norway. Organic farmers had the least risk averse perceptions. Institutional and production risks were perceived as primary sources of risk, with farm support payments at the top. Compared to their conventional colleagues, organic farmers gave more weight to institutional factors related to their production systems. Conventional farmers were more concerned about costs of purchased inputs and animal welfare policy. Organic and conventional farmers' management responses were more similar than their risk perceptions. Financial measures such as liquidity and costs of production, disease prevention, and insurance were perceived as important ways to handle risk. Even though perceptions were highly farmer-specific, a number of socio-economic variables were found to be related to risk and risk management. The primary role of institutional risks implies that policy makers should be cautious about changing policy capriciously and they should consider the scope for strategic policy initiatives that give farmers some greater confidence about the longer term. Further, researchers should pay more attention to institutional risks. (c) 2004 Elsevier B.V. All rights reserved.

Abstract

About 22 % of the conventional dairy and cash crop farmers in Norway were considering or were planning to convert to organic farming during the next four years. For these farmers, here called potential converters, higher soil fertility, professional challenges, profitability, and organic farming payments were important motives for considering to convert.

Abstract

About 22 % of the conventional dairy and cash crop farmers in Norway were considering or were planning to convert to organic farming during the next four years. For these farmers, here called potential converters, higher soil fertility, professional challenges, profitability, and organic farming payments were important motives for considering to convert.

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Abstract

Because the analysis of risky choice in agriculture and rural resource management is important but difficult, we argue that there is a need for some agreed principles on how to proceed. This paper is intended as a first step to this end. We start with the proposition that the importance of risk aversion has generally been exaggerated relative to the task of finding better ways to deduce relevant and reliable probabilities. Getting better probabilities demands careful thought, drawing on what is know about the pitfalls and on evolving insights into better ways of proceeding. Our aim is to stimulate a debate leading to a clearer consensus about better practice in these matters.

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Abstract

This study was conducted to explore organic and conventional dairy farmers perceptions of risk and risk management, and to examine relationships between farm and farmer characteristics, risk perceptions, and strategies. The data originate from a survey of conventional (n = 363) and organic (n = 162) dairy farmers in Norway. Organic farmers had the least risk averse perceptions. Institutional and production risks were perceived as primary sources of risk, with farm support payments at the top. Compared to their conventional colleagues, organic farmers gave more weight to institutional factors related to their production systems. Conventional farmers were more concerned about costs of purchased inputs and animal welfare policy. Organic and conventional farmers management responses were more similar than their risk perceptions. Financial measures such as liquidity and costs of production, disease prevention, and insurance were perceived as important ways to handle risk. Even though perceptions were highly farmer-specific, a number of socio-economic variables were found to be related to risk and risk management. The primary role of institutional risks implies that policy makers should be cautious about changing policy capriciously and they should consider the scope for strategic policy initiatives that give farmers some greater confidence about the longer term. Further, researchers should pay more attention to institutional risks.

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Abstract

This study presents empirical insight into organic and conventional cash crop farmers' perceptions of risk and risk management strategies, and identifies socio-economic variables linked to these perceptions. The data originate from a questionnaire survey of farmers in Norway. The results indicate that organic farmers perceived themselves to be less risk aversethan conventional farmers. For both groups, crop prices and yield variability were the two top rated sources of risk, followed by institutional risks. The two groups evaluated risk management strategies quite similarly; favoured strategies weregood liquidity and to prevent and reduce crop diseases and pests. The farmers' evaluation of sources of risk and choice of risk strategies depended onvarious socio-economic variables. The importance of institutional risks implies that policy makers should be cautious about changing policy capriciously and they should consider strategic policy initiatives that give farmers more long-term reliability.

Abstract

The objective of this study was to provide empirical insight into dairy farmers goals, relative risk attitude, sources of risk and risk management responses. The study also examines whether organic dairy farming, leads to important risk sources not experienced in conventional farming and, if so, howthose extra risks are managed. The data originate from a questionnaire survey of conventional (n=373) and organic (n = 162) dairy farmers in Norway. The results show that organic farmers have somewhat different goals than conventional farmers,and that the average organic farmer is less risk averse. Institutional risk was perceived as the most important source ofrisk, independently of conventional or organic production system. Keeping cash on hand wasthe most important strategy to manage risk for all dairy farmers.

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Abstract

A method of stochastic dominance analysis with respect to a function (SDRF) is described and illustrated. The method, called stochastic efficiency with respect to a function (SERF), orders a set of risky alternatives in terms of certainty equivalents for a specified range of attitudes to risk. It can be applied for conforming utility functions with risk attitudes defined by corresponding ranges of absolute, relative or partial risk aversion coefficients. Unlike conventional SDRF, SERF involves comparing each alternative with all the other alternatives simultaneously, not pairwise, and hence can produce a smaller efficient set than that found by simple pairwise SDRF over the same range of risk attitudes. Moreover, the method can be implemented in a simple spreadsheet with no special software needed.

Abstract

Stochastic budgeting is used to simulate the business and financial risk and the performance over a 6-year planning horizon on a Norwegian dairy farm. A major difficulty with stochastic whole-farm budgeting lies in identifying and measuring dependency relationships between stochastic variables. Some methods to account for these stochastic dependencies are illustrated. The financial feasibility of different investment and management strategies is evaluated. In contrast with earlier studies with stochastic farm budgeting, the option aspect is included in the analysis.

Abstract

As more data have been amassed and interest in working with the ensuing data sets have grown, methods for organizing and examining the data have evolved. The need to work with these larger amounts of data has led to the development of ‘data mining’ methods and software. Data mining has a somewhat skewed reputation, and has often been characterised as ‘data dredging’ or ‘fishing expeditions’ . However, most of us must admit that such ‘expeditions’ or what one also could call hypothesis-generating approaches where we look for both likely and less likely associations, has occurred within our own research. In principal, generating promising associations is what data mining is all about. In this paper we have applied one of many commercial software available (Enterprise Miner, SAS) on a small dataset merged from a questionnaire data set and the national dairy cattle health and production records. We investigated for patterns separating organic dairy farmers from the conventional ones. The main framework of the data mining approach, some of the core modelling methods and the data mining results are briefly described and assessed.

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Abstract

A model is presented to investigate the optimal economic life cycle of grass leys with winter damage problems in northern Norway and to determine the threshold of winter damage before it is profitable to reseed. A two‐level hierarchic Markov process has been constructed using the MLHMP software (the MLHMP software and the plug‐in constructed for this model are available for download at http://www.prodstyr.ihh.kvl.dk/software/mlhmp.html). The model takes uncertainty concerning yield potential, damage estimation and weather‐dependent random fluctuations into account. A Kalman filter technique is used for updating the knowledge of yield potential and damage level. The application of the model is demonstrated using data from two commercial Norwegian farms. As parameter estimates vary considerably among farms, it is concluded that decision support concerning optimal economic life cycle of grass leys should be done at farm level. The results also show the importance of using a flexible dynamic replacement strategy. Use of the model for specific farm situations is illustrated.

Abstract

The objective of this study was to provide empirical insight into dairy farmers’ goals, relative risk attitude, sources of risk and risk management responses. The study also examines whether organic dairy farming, leads to important risk sources not experienced in conventional farming and, if so, how those extra risks is managed. The data originate from a questionnaire survey of conventional (n=370) and organic (n = 160) dairy farmers in Norway. The results show that organic farmers have somewhat different goals than conventional farmers, and that the average organic farmer is less risk averse. Institutional risk was perceived as the most important source of risk, independently of conventional or organic production system, while organic farmers indicated greater concern about forage yield risk. Keeping cash on hand was the most important strategy to manage risk for all dairy farmers. Diversification and different kinds of flexibility was regarded as a more important risk management strategies among organic than conventional farmers.

Abstract

The Norwegian Ministry of Agriculture (1999) has announced its goal of converting 10% of the total agricultural area to organic farming methods by the year 2009. Considerations of profitability and risk will be especially important, when the conversion of a farm is planned. Studies of risk and risk management in organic farming have been lacking in Norway. Only very few such studies have been carried out internationally, thus showing that there is a definite need for more risk and risk management research in organic farming. The project aims to increase knowledge about risks and risk management in organic farming systems. It is a co-operation between NILF, NORSK, and NVH. Both biological and economic aspects of risk will be taken into consideration. We wish to test and apply acknowledged statistical and risk analysis theories and methods on issues related to organic farming. The project will deal with the extent of risk in organic farming, strategies used by organic farmers to handle risk and whole-farm models to analyse optimal economic solutions under uncertainty in organic farming. The project will cover farms that are still in conversion and completely converted farms. Results from the project will directly benefit farmers and farm advisers. Politicians and public administrators will receive access to significant information for the design of future policies.

Abstract

Farmers in northern Norway have experienced severe winter damage on grassland rather frequently, especially on flat areas and peat soils in regions with an unstable winter climate around zero degrees Celsius. Traditional drainage with drainpipes is normally not sufficient to prevent such damage in these areas. During the past two decades the use of open ditches and surface grading has become the main method of reclaiming and draining peat land. A new heuristic stochastic dynamic analysis method for problems like this, combining simulation and optimisation, is used to explore the profitability of surface grading of peat soils. This analysis indicates that the year in which a ley should be reseeded depends on stage in the growth curve when eventually the winter damage happens as well as on the severity of the damage. Given the present acreage subsidy payment, surface grading is normally profitable from a farmers point of view.

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Abstract

A method of stochastic dominance analysis with respect to a function (SDRF) is described and illustrated. The method, called stochastic efficiency with respect to a function (SERF), partitions a set of risky alternatives in terms of certainty equivalents for a specified range of attitudes to risk. It can be applied for any utility function with risk attitudes defined by corresponding ranges of absolute, relative or partial risk aversion coefficients. SERF involves comparing each alternative with all the other alternatives simultaneously, not pairwise as with conventional SDRF. Hence it yields a subset of the efficient set found by SDRF. Moreover, the method is readily implemented in a simple spreadsheet with no special software needed.

Abstract

A new non‐parametric method to estimate a decision maker's coefficient of absolute risk aversion from observed economic behaviour is explained. The method uses the expected value‐variance (E‐V) framework and quadratic programming. An empirical illustration is given using Norwegian farm‐level data.

Abstract

Empirical evidence suggests that agricultural futures price movements have fat-tailed distributions and exhibit sudden and un xpected price jumps. There is also evidence that the volatility of futures prices contains a term structure depending on both calendar-time and time to maturity. This paper extends Bates (1991) jump-diffusion option pricing model by including both seas nal and maturity effects in volatility. An in-sample fit to market option prices on wheat futures show that our model outperforms previous models considered in the literature. A numerical example illustrates the economic significance of our results for option valuation.

Abstract

Farmers in northern Norway have experienced frequent winter damages of grassland, especially on flat areas and peat soils. The use of open ditches and surface grading has become the common method to drain such fields and for reclaiming new land with such characteristics. We designate this as surface grading in this paper. An investment analysis is carried out to explore the profitability of this method. This analysis indicates that the method is profitable from the farmers’ point of view. However, the conclusions are sensitive to changes in crop yields and the value of the yields. The cost of a winter damage and thus an unplanned reseeding is high for young leys, but is small for leys approaching the optimal replacement age.

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Abstract

This paper addresses the impacts of degree of risk aversion, subsidy scheme and choice of utility function on optimal farm plans in Norwegian agriculture. Data from a farm business survey (1991-1997) are combined with subjective judgements to formulate a two-stage utility-efficient programming model. Under existing policy and market conditions, the ex ante expectation was that farmers' risk attitudes are unlikely to have a large effect on choice of enterprise mix. The results tend to confirm this view, and a farmer who is hardly risk averse at all would choose the same farm plan as a very risk averse farmer. Factors such as subsidy schemes, market conditions for the products and available labour on the farm are found to be more important determinants of the optimal plans than farmers' risk attitude or the form of the utility function.