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European Review of Agricultural Economics Advance Access originally published online on March 18, 2009
European Review of Agricultural Economics 2009 36(1):53-77; doi:10.1093/erae/jbp003
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© Oxford University Press and Foundation for the European Review of Agricultural Economics 2009; all rights reserved. For permissions, please email journals.permissions@oxfordjournals.org

The effects of EU agricultural policy changes on farmers' risk attitudes

Phoebe Koundouri

DIEES, Athens University of Economics and Business, Greece

Marita Laukkanen and Sami Myyrä

Agrifood Research Finland, Helsinki, Finland

Céline Nauges

LERNA-INRA, Toulouse School of Economics, France

Corresponding author: Céline Nauges, LERNA-INRA, Toulouse School of Economics, Manufacture des Tabacs, 21 Allée de Brienne, 31000 Toulouse, France. E-mail: cnauges{at}toulouse.inra.fr

Received November 2007; final version received January 2009

This analysis utilises a model of production under risk estimated on Finnish farm-level data to measure farmers' risk attitudes in a changing policy environment. We find evidence of heterogeneous risk preferences among farmers, as well as notable changes over time in farmers' degree of risk aversion. This result is due to the increase in the non-random part of farm income generated by the policy change after Finland's European Union accession. The analysis confirms the assertion that agricultural policies that are decoupled from production do affect input use and crop mix through their effect on farmers' risk attitudes.

Keywords: Common Agricultural Policy, risk preferences, decoupled payments, Finland

JEL classification: C33, D81, Q12, Q18


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