WHEAT, ALLOCATIVE ERROR AND RISK : NORTHERN TUNISIA

To fill this knowledge gap, this study analyzes how farmers" knowledge and perception of risk affects resource allocation in the production of ordinary and high-yield varieties (HYV"s) of wheat. Two different production functions -- one linking expected with actual yield and the other relating actual yield and inputs -- were fitted to data gathered from 125 Northern Tunisian wheat farmers during the 1976-77 crop year. The authors then compared the two functions in order to quantify and explain errors in resource allocation and to analyze the impact of these errors on yield and land area planted in HYV"s. The analysis showed that most farmers were risk adverse and were especially wary of HYV"s. As a result, they were deterred from planting "riskier" HYV"s and underutilized fertilizer and machinery. High risk aversion was positively related to age and the farming of valley land and was negatively related to farm size. Although farmers were quite knowledgeable of the correspondence between input use and yield, they significantly overestimated yield, especially for HYV"s, because they did not anticipate less than favorable weather. In addition, not only were allocation errors greater in the production of HYV"s, but, when the weather was poor, HYV"s out-yielded ordinary varieties only with high input use. The report thus recommends that: (1) extension programs emphasize the relationship between yield, inputs (fertilizer, machinery), and weather and take into account farmers" resources and age as well as farm size and environment; (2) inter-variety planting be encouraged to maintain sufficient risk diversification; (3) further consideration be given to establishing crop insurance programs; (4) fertilizer and machinery services be made more readily available; (5) crop price controls be instituted; and (6) plant breeders attempt to develop new varieties which, while having a higher yield, are otherwise similar to traditional varieties. Appended are a 22-item bibliography (l974-79) and research formulae and data.