Production Risk, Farmer Welfare, and Bt Corn in the Philippines
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This article examines the production risk effects and welfare implications of Bt corn adoption in the Philippines by specifically considering the impact of Bt on the mean, variance, and skewness of yields. Assessing the skewness effects of Bt provides further inferences about the downside risk protection of this technology in a developing country context. Stochastic production function estimation is utilized to achieve the study objective, including an approach that allows for examining the skewness effects of Bt within a damage abatement specification. Our results indicate that Bt corn do not have a statistically significant risk-reducing (i.e., variance-reducing) or downside risk-reducing (i.e., skewness-increasing) effect, the main benefit is through its mean yield increasing effect. But we find that the probability of suffering a profit loss is lower for Bt farmers than for non-Bt farmers. Based on risk premium and certainty equivalent welfare measures, Bt corn farmers in the Philippines is still better-off (in welfare terms) relative to non-Bt farmers given Bt corn’s dominant yield increasing effect and lower probability of profit loss.