Yield Uncertainty and Risk aversion in Duality models: a Mean-Variance approach

This paper aims at the exploration of the questions connected with the effects of uncertainty and risk in agriculture and, generally, in each economic sector where risk considerations are established. The aim of the first part is to give the key features for the estimation of production structures using dual approach and risk prevalence. In order to state risk non-neutrality into the implemented dual approach, Meanvariance utility function of revenue is introduced thereafter to be the objective function for the producer’s optimization process rather than revenue. Uncertainty was set as consequence of a weather variable variance and randomness of outputs’ quantities. The estimation is implemented on panel data of the Tunisian cereals sector from 1983 to 2005. The regional coefficients of risk aversion were highly significant and results from the Mean-Variance model shows several salient results relative to both weather and yield variability.