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

Abstract

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.