Impact of risk aversion on fertiliser use: evidence from Vietnam

Fake or substandard fertiliser is a growing concern in many countries. Even in places not affected by fertiliser quality problems, uncertainty could arise due to weather variability, soil quality, or doubts about the effectiveness of fertiliser in general. Past literature has shown that risk aversion leads to lower fertiliser use and farmers become less risk averse as they become wealthier. We build upon this literature by showing that the marginal effect itself might not be the same for farmers of different wealth levels either. In our study, the measures of risk aversion were elicited from two different techniques: a self-assessment question and a lottery game. Results from regression analysis show that the marginal effect of risk aversion on fertiliser use depends on the wealth levels of farmers. Low-wealth farmers reduce their fertiliser intensity when their risk aversion increases. The marginal effect for high-wealth farmers is insignificant.