Reductions of Agricultural Nitrogen Use Under Consideration of Production and Price Risks
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Production and price risks affect optimal nitrogen use as well as the effects of nitrogen taxation if
farmers’ risk aversion is taken into account. Our empirical analysis for Swiss maize production shows
that risk-aversion leads to lower levels of nitrogen application, and nitrogen taxes lead to higher
reductions of nitrogen use for risk-averse than for risk-neutral farmers. Moreover, risk-averse farmers
face lower abatement costs. Sensitivity analyses, that consider expected shocks in price and yield
variability in Swiss maize production, show that these differences between risk-averse and risk-neutral
farmers will increase further. Thus, agricultural policies should consider farmers’ risk-preferences as
well as potential increases in farmers’ income risks.