Why Farmers Sometimes Love Risks: Evidence from India

摘要

In developing countries, where the majority of the population depends on agriculture, incomes often display a considerable amount of variation due to fluctuations in rainfall, disease, and pest pressure. As few insurance possibilities exist, attitudes toward risk are crucial determinants of economic decisions and in particular investment behavior. The extensive literature that tries to measure risk attitudes has sometimes inferred them from economic decisions (see, e.g., Moscardi and De Janvry 1977; Antle 1987). Other studies have attempted to directly elicit preferences over risky distributions (see, e.g., Dillon and Scandizzo 1978; Binswanger 1980; Just and Lybbert 2009; Yesuf and Bluffstone 2009; Liu 2013). Following in the line of this second strand of the literature, we conducted experiments to measure the attitudes toward risk among cotton farmers in three villages in India. These attitudes were elicited via farmers' evaluations of hypothetical (but realistic) production alternatives involving various risky outcomes. Each alternative was presented as a probability distribution over cotton yield outcomes. The farmers then indicated their willingness to pay for a bag of cotton seeds that would result in such a distribution.