Risk perception and production risk in seaweed aquaculture

Abstract

Risk is an inherent characteristic of aquaculture production. For a holistic understanding of risk, the risk assessment process must account for both subjective and objective dimensions of risk. This paper empirically studies the role of risk perception and the risk properties of inputs used in aquaculture to explain the low adoption rates of seaweed farming in Chile. We propose a risk production estimation framework with selectivity to explore the role of risk, given that many aquaculture concessions remain totally or partially unexploited. We found that farmers are more likely to produce seaweed when they perceive greater access to financing, but also that this activity is more exposed to theft than other activities. Moreover, results suggest that labor and energy are risk-increasing inputs, while we found that capital and the number of hectares available are risk-decreasing inputs. The latter is important as it suggests that larger seaweed producers and more investment would reduce production variability.

Keywords:

• Production risk
• sample selection
• seaweed aquaculture

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 Inverse Mill’s ratio is defined by ${\mathit{\text{IMR}}}_{}=\frac{\varphi (g(z,\widehat{{\lambda }_i}))}{1-\Phi (g(z,\widehat{{\lambda }_i}))},$ where $\varphi (.)$ and $\mathrm{\Phi }(.)$ represent the standard normal probability density and cumulative distribution function, respectively.

2 Data can be access upon request. At the time of the data collection, there was not an ethic committee in the host institution and therefore a protocol to follow. However, subjects provided appropriate informed consent to respond the survey. Note that data was collected for a project funded by the Fishing and Aquaculture Research Fund (FIPA) of the Chilean government, and then fulfilled with all the ethical consideration requested by this fund at the date of the application.

3 We assume that if potential producers report some positive volume of production, they are using their concessions/authorizations and therefore participating in seaweed farming. A fair concern is that some cases with harvests equal to zero may have positive values for hectares devoted to seaweed farming, indicating crop failure. After a careful looking at the data, this is not the case. Another issue is that “potential producers” could be producers in the middle of a production cycle, producers starting production (without harvest in the studied period), or producers who, for some reason, decided not to harvest in the studied period. As stated before, we asked potential producers to report their production after completing the last production cycle. This automatically discards seaweed farmers in the middle of a production cycle and producers starting production, since the question was framed to consider the immediate previous growing season. Indeed, potential producers in our sample, for some reason, may have decided not to harvest in the last growing season, but they may have done that before 2016. Unfortunately, we do not observe this characteristic in our data. We recognized this issue as a potential concern.

4 Particularly, producers were asked to answer the following question: “According to your opinion, how does seaweed farming relate to other income-generating activities that you perform (greater, equal, lower, do not know) in the following dimensions: (i) financing needs, (ii) access to finance, (iii) business security, (iv) exposure to robbery, and (v) access to markets.”

5 Data used in our analysis cover various seaweed species and two types of producers (concessions and TURFS). This heterogeneity is the main motivation for approaching the analysis in monetary terms rather than solely using production volumes. In addition, we have used the percentage of income derived from seaweed farming activity as a weighting factor. In this way, we believe that using the monetary value of production and the percentage of income associated with the activity as a weighting factor is more appropriate to allow comparisons among producers.

Additional information

Funding

This work was supported by CAPES [ANID PIA/BASAL FB0002] and INCAR [FONDAP (No. 1522A0004) and FONDAP (No.15110027)].