Time series analysis to enhancing net revenue of farming in Malaysia through agriculture Extension and risk aversion

Abstract

Farming and agricultural industry is prone to risk due to factors that are beyond the control of farmers like weather, and this can lead to adversely affecting the farm income. Because the farmers are found to be risk-averse, it is essential to focus on the impact that it can create on the net income of the farm. Another, facet of the agricultural industry and revenue is the exposure and access to extension services. Extension services assist the farmers through educational processes and work through the improvement in the farming procedures and practices. These services and practices can lead to substantiating the net revenue of the farms through adoption of profitable practices. Thus, the focus of the present study is on evaluating the impact of risk aversion and agricultural extension on the net revenue of farms in Malaysia. The study adopts a time series approach and adapts the dynamic time series model for studying the associations among the variables in the long and short run. The study found evidence of cointegration and lack of stochastic issues in the data. The results from the estimation indicated that agricultural extension leads to improved net revenue for the farms. However, risk aversion pertains detrimental effects to the profitability and revenue of the farming households. The study has important implications and policy recommendations.