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Factors Affecting Farmers’ Utilization of Agricultural Risk Management Tools: The Case of Crop Insurance, Forward Contracting, and Spreading Sales
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Abstract
Factors affecting the adoption of crop insurance, forward contracting, and spreading sales are analyzed using multivariate and multinomial probit approaches that account for simultaneous adoption and/or correlation among the three risk management adoption decisions. Our empirical results suggest that the decision to adopt crop insurance, forward contracting, and/or spreading sales are correlated. Richer insights can be drawn from our multivariate and multinomial probit analysis than from separate, single-equation probit estimation that assumes independence of adoption decisions. Some factors significantly affecting the adoption of the risk management tools analyzed are proportion of owned acres, off-farm income, education, age, and level of business risks.adoption decisions, crop insurance, forward contracting, multinomial probit, multivariate probit, risk management, spreading sales, Agribusiness, Agricultural Finance, Crop Production/Industries, Demand and Price Analysis, Risk and Uncertainty, G22, Q12, Q18,