A New Mean Standard Deviation Utility Function and the Behaviour Towards Risk of Specialist Irish Agricultural Producers: 1988-1997

This paper employs a new mean-standard deviation utility (MSU) function with more general properties than traditionally employed function in the agricultural economics literature to explore the risk preferences of Irish barley producers between 1988 and 1997. During this period EU cereal producers were subject to major policy reforms (MacSharry Reforms) that may have influenced the nature of producers' risk attitudes. Our findings support the proposed function in preference to the Linear Mean Variance (LMV) function. We find that Irish cereal producers are highly risk averse but their degree of risk aversion falls appreciably in the period before and following the MacSharry Reforms. We also find that the majority of Irish producers exhibit increasing absolute risk aversion (IARA) but the proportion displaying DARA increases substantially following the 1992 Reforms. The policy implications of our results are discussed.