Income risk and farm consumption behavior
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Using panel data from Illinois grain farmers, a direct test of the relationship between income risk and farm consumption
behavior is conducted. The estimation results indicate that income risk significantly affects farm consumption and the results
are robust using alternative risk measures. This finding casts doubt on the relevance of the conventional life-cycle permanent
income hypothesis, which implies that risk has no effect on consumption. © 1999 Elsevier Science B.V. All rights reserved.