Agricultural Economics and Development

Agricultural Economics and Development

Determining the Degree of Risk Aversion Using Multi-Criteria Decision-Making Analysis: A Case Study of Farmers in Goharbaran Region of Sari

Document Type : Original Article

Authors
Tahereh Ranjbar Malekshah 1
Seyed-Ali Hosseini-Yekani 2
Seyed-Mojtaba Mojaverian 3
1 . PhD Student in Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran
2 Associate Professor, Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari
3 Associate Professor, Department of Agricultural Economics, Sari Agricultural Sciences and Natural Resources University, Sari, Iran
10.30490/aead.2020.252527.0
Abstract
Given the importance of understanding the agricultural risk behavior for useful policy making in agriculture, this study aimed at determining the degree of absolute risk aversion of farmers in Goharbaran region of Sari County in Iran using multi criteria decision making (MCDM) analysis. Then, the relation between the degree of risk aversion of the farmers and their socio-economic characteristics were investigated. Required data were collected through questionnaires and interviews with 250 farmers in 2014. The study results showed that majority of the farmers belonged to the group with high level of risk averse; and among their effective socio-economic characteristics (including age, education, farm size, family size, agricultural income, percentage of income from farming, land ownership, farming experience and loan), the variables of agricultural income, percentage of income from farming and family size were positively and farm size and loan negatively correlated with the absolute degree of risk aversion of the farmers. Considering the high degree of risk aversion among majority of the studied farmers, the risk management would seem to be highly important. Therefore, a number of measures like common cultivation, product diversification and population control by the farmers themselves and strategies such as development of cooperatives, credit expansion, guaranteed prices, insurance and establishment and development of futures markets by policy makers were suggested.
Keywords
Multi Criteria Decision Making (MCDM)
Socio-Economic Characteristics
Absolute Risk Aversion
Farmers
Goharbaran Region of Sari

  1. منابع

    1. Akbari, A., Shahiki-Tash, M.N. and Yazdani, F. (2014). Identification of risk factors affecting the production of pistachio in Sirjan. Journal of Agricultural Economics Researches, (23): 175-190. (Persian)
    1. Amador, F., Sumpsi, J.M. and Romero, C. (1998). A non-interactive methodology to assess farmers’ utility function: an application to large farms in Andalusia. Spain. European Review of Agricultural Economics, 25(1): 92-109.
    2. Arrow, K.J. (1965). Aspects of the theory of risk-bearing. , Helsinki: Academic Publishers.
    3. Bielza, M., Conte, C., Dittmann, Ch., Gallego, J. and Stroblmair, J. (2008). Agricultural insurance schemes. Institute for the Protection and Security of the Citizen, Agriculture and Fisheries Unit.
    4. Cochran, C.B. (1977). Sampling Techniques. New York: John Wiley.
    5. Dianati Deilami, Z., Behzadpour, S., Alami, M.R. and Haji-Maghsoudi, M. (2011). Application of multi criteria decision making techniques (hierarchical analysis and TOPSIS) in predicting the future of companies in tehran stock exchange. Journal of Financial Engineering and Management of Securities. 9: 181-203. (Persian)
    6. Dillin, Y.L. and Hardaker, J.B. (1986). Farm management research for small farms development. Rome: FAO.
    7. Dyer, J.S. (1977). On the relationship between goal programming and multiattribute utility theory. Discussion Paper 69, Management Study Center, University of California, Los Angeles.
    8. Gomez Limon, J.A., Arriaza, M. and Riesgo, L. (2003). An MCDM analysis of agricultural risk aversion. European Journal of Operational Research, (151): 569-585.
    9. Hwang, C.L. and Yoon, K. (1981). Multi attribute decision making. New York: Springer-Verlag.
    10. Just, R.E. and Pope, R.D. (1978). Stochastic specification of production function and economic implications. Journal of Econometrics, 7(1): 67-86.
    11. Moscardi, E. and Dejanvry, A. (1977). Attitudes toward risk among peasants: an econometric approach. American Journal of Agricultural Economics, (59): 710-716.
    12. Nematollahi, Z., Hosseini Yekani, S.A. and Hosseinzadeh, M. (2015). Estimation of risk aversion coefficient of farmers in Esfarayen County and its effective factors (nonparametric approach).Journal of Economics and Agriculture, (3): 284-293. (Persian)
    13. Praat, J.W. (1964). Risk aversion in the small and in the large. Econometrical, (32): 122-136.
    14. Randhir, O.T. (1991). Influence of risk on input use in south Indian tank fed farms. Indian Journal of Agricultural Economics, (46):57-63.
    15. Rousta, K., Farajollah Hosseini, S.J., Chizari, M. and Hosseini, S.M. (2009). Investigating the factors affecting farmers' ability in risk management (a case study of wheat farmers of Khorasan Razavi). Journal of Agricultural Economics Researches, (3): 127-141. (Persian)
    16. Shajari, Sh. and Torkamani, J. (2007). Approximation of multi-criteria decision-making simulations to study irrigation water demand: a case study of Doroudzan catchment area in Fars province. Agricultural Economics (Economics and Agriculture), 1(3) (Special Issue of Sixth Conferevce on Iranian Agricultural Economics): 331-345. (Persian)
    17. Sulewski, O. and Kloczko Gajewska, A. (2014). Farmers' risk perception, risk aversion and strategies to cope with production risk: an empirical study from Poland. Studies in Agricultural Economics, (116): 140-147.
    18. Sumpsi, J.M., Amador, F. and Romero, C. (1993). A research on the Andalusian farmers’ objectives, methodological aspects and policy implications. VIIth EAAE Congress, Stresa, Italy.
    19. Tauer, W. (1983). Target MOTAD. American Journal of Agricultural Economics, (65): 606-610.
    20. Yazdani, S. and Kiani-Rad, A. (2008). Income insurance, a new model in management of product risk. Journal of Agricultural Economics Researches. (47): 64-79. (Persian)
    21. Yazdani, S. and Sasooli, M. (2008). Studying the effects of inputs on production risk of rice in Shaft County in Guilan province. Journal of Economics and Agriculture, (1): 35-46. (Persian)
    22. Zopounidis, C. and Doumpos, M. (2002). Multi-criteria decision aid in financial decision making: methodologies and literature review. Journal of Multi-Criteria Decision Analysis. (11): 167-186.
    1. Anderson, J.R. and Dillon, J.L. (1992). Risk analysis in dry land farming systems. Farm System Management. Series 2, Rome: FAO.
    1. Aye, G.C. and Oji, K.O. (2007). Effect of poverty on risk attitudes of farmers in Benue State, Nigeria. 12th Annual Conference of Econometric Modeling for Africa.
    1. Brian, E. (2015). The risk attitudes of U.S. farmers. Oxford Journals, Social Sciences, Applied Economic Perspectives and Policy. (37): 553-574.
    1. Ehsan, A.A.R., Tehrani, R. and Eslami Bigdeli, Gh.R. (2008). The investigation of risk aversion coefficient and the variance of production in risk management, case study: tomato producers in Dezfool. Agricultural Economics and Development, (61): 17-35. (Persian)
    2. Golkaran-Moghaddam, S. (2014). Production risk and risk trends of saffron farmers in Torbat Heidariyeh County with an emphasis on poverty. Journal of Agriculture Economics and Development, (87): 1-21. (Persian)
    1. Gomez Limon J.A. and Martinez, Y. (2005). Multi-criteria modelling of irrigation water market at basin level: a Spanish case study. European Journal of Operational Research, 1-24.
    2. Gomez Limon J.A. and Riesgo, L. (2004). Irrigation water pricing: differential impacts on irrigated farms. Journal of Agricultural Economics, (31): 47-66.
    1. Jafarzadeh, A. (1999). The importance of agricultural insurance in the normal compensation. Journal of the Insurance Industry, (55): 142-160. (Persian)
    1. Mortazavi, S.A., Ghorbani, M., Borujeni, P. and Alipour, A. (2012). Factors affecting the pomegranate's production risk with emphasis on poverty: a case study of villages in central region of Shahreza County. Journal of Agricultural Economics Researches, (3): 21-37. (Persian)
    1. Torkamani, J. (2000). Comparison and assessment of main methods determining the agricultural operators’ tendency toward risk: a case study of husbandry units of dairy cows. Quartery Journal of Agricultural Economics and Development, 8(31): 31-55. (Persian)
    2. Yazdani, S. and Feizabadi, Y. (2005). Determining the degree of risk aversion in poultry industry and factors affecting the risk aversion: a case study of Sabzevar County of Iran. Journal of Agricultural Sciences, 11(2): 15-24. (Persian)