The Influence of Risk Aversion on the Uptake of Set‐aside: A Motad and CRP Approach

This paper applies MOTAD and CRP models to the farm set‐aside decision and presents a framework for analysis which examines the influence of risk on the land‐idling decision. The results suggest that set‐aside payment at a rate of £180‐£200 per hectare would be attractive only at relatively high levels of risk aversion on an East Anglian specialist cereal farm and with moderate risk aversion on a Northumberland mixed farm. However, at identical levels of risk aversion, the area set aside was greater on the East Anglian farm. A survey to ascertain farmers' risk: income weightings is suggested as a useful adjunct to this work.