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Regional Variation in Risk and Time Preferences: Evidence from a Large-scale Field Experiment in Rural Uganda

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  • Yuki Tanaka
  • Alistair Munro

Abstract

Experiments measuring risk and time preferences in developing countries have tended to have relatively small samples and geographically concentrated sampling. This large-scale field experiment uses a Holt–Laury mechanism to elicit the preferences of 1,289 randomly selected subjects from 94 villages covering six out of seven agro-climatic zones across rural Uganda. As in previous studies, we find evidence of risk aversion and loss aversion among most subjects. In addition, we find significant heterogeneity in risk attitudes across agro-climatic zones. Especially, the farmers in the agro-climatically least favourable zone, the uni-modal rainfall zone, are the most risk-averse, loss-averse and impatient. We also find significant relationships between risk attitudes and village-level predictors such as the distance to town and the road conditions. After controlling for the village-level factors, we find that the level of schooling still positively correlates with the individual's level of loss tolerance and patience. The main results are not altered by allowing for probability weighting in subjects' choices. Overall the results provide clear evidence that within one country there may be significant regional variations in risk and time attitudes. We conjecture that the agro-climatic conditions that affect farmers' livelihoods may also affect their risk and time preferences, and village-level development in infrastructure could improve the household perception of investment-related policies.

Suggested Citation

  • Yuki Tanaka & Alistair Munro, 2014. "Regional Variation in Risk and Time Preferences: Evidence from a Large-scale Field Experiment in Rural Uganda," Journal of African Economies, Centre for the Study of African Economies, vol. 23(1), pages 151-187.
    • Handle: RePEc:oup:jafrec:v:23:y:2014:i:1:p:151-187.
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    File URL: http://hdl.handle.net/10.1093/jae/ejt020
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    1. Kenta Tanaka & Keisaku Higashida & Arvin Vista & Anton Setyo Nugroho & Budi Muhamad Ruslan, 2016. "Do resource depletion experiences affect social cooperative preferences? Analysis using field experimental data on fishers in the Philippines and Indonesia," Discussion Paper Series 143, School of Economics, Kwansei Gakuin University, revised Jun 2016.
    2. Mertens, Kewan & Vranken, Liesbet, 2018. "Investing in land to change your risk exposure? Land transactions and inequality in a landslide prone region," World Development, Elsevier, vol. 110(C), pages 437-452.
    3. Emmanuel Kwablah Apiors & Aya Suzuki, 2018. "Mobile Money, Individuals’ Payments, Remittances, and Investments: Evidence from the Ashanti Region, Ghana," Sustainability, MDPI, vol. 10(5), pages 1-26, May.
    4. Epper, Thomas, 2015. "Income Expectations, Limited Liquidity, and Anomalies in Intertemporal Choice," Economics Working Paper Series 1519, University of St. Gallen, School of Economics and Political Science.
    5. Schrieks, Teun & Botzen, W.J. Wouter & Haer, Toon & Aerts, Jeroen C.J.H., 2024. "Drought risk attitudes in pastoral and agro-pastoral communities in Kenya," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 108(C).
    6. Reyes, René & Nelson, Harry & Zerriffi, Hisham, 2021. "How do decision makers´ ethnicity and religion influence the use of forests? Evidence from Chile," Forest Policy and Economics, Elsevier, vol. 128(C).
    7. Verschoor, Arjan & D’Exelle, Ben & Perez-Viana, Borja, 2016. "Lab and life: Does risky choice behaviour observed in experiments reflect that in the real world?," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 134-148.
    8. Ruth Hill & Carolina Mejia-Mantilla & Kathryn Vasilaky, 2021. "Is the Price Right? Returns to Input Adoption in Uganda," Working Papers 2105, California Polytechnic State University, Department of Economics.
    9. François-Charles Wolff, 2020. "The intergenerational transmission of risk attitudes: Evidence from Burkina Faso," Review of Economics of the Household, Springer, vol. 18(1), pages 181-206, March.
    10. Sepahvand, Mohammad & Shahbazian, Roujman, 2017. "Individual’s Risk Attitudes in sub-Saharan Africa: Determinants and Reliability of Self-reported Risk in Burkina Faso," Working Paper Series 2017:11, Uppsala University, Department of Economics.
    11. Jing Liu & Fubin Huang & Zihan Wang & Chuanmin Shuai & Jiaxin Li, 2020. "Understanding the Role of Rural Poor’s Endogenous Impetus in Poverty Reduction: Evidence from China," Sustainability, MDPI, vol. 12(6), pages 1-16, March.
    12. Abbas, Qasir & Han, Jiqin & Bakhsh, Khuda & Ullah, Raza & Kousar, Rakhshanda & Adeel, Adnan & Akhtar, Asma, 2022. "Adaptation to climate change risks among dairy farmers in Punjab, Pakistan," Land Use Policy, Elsevier, vol. 119(C).
    13. Holden , Stein, 2014. "Risky Choices of Poor People: Comparing Risk Preference Elicitation Approaches in Field Experiments," CLTS Working Papers 10/14, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.
    14. Yuki Tanaka & Takashi Yamano, 2015. "Risk and Time Preference on Schooling:Experimental Evidence from a Low-Income Country," GRIPS Discussion Papers 14-24, National Graduate Institute for Policy Studies.
    15. Ambali, Omotuyole I. & Areal, Francisco J. & Georgantzis, Nikolaos & Oyetunde-Usman, Zainab, 2021. "Examining the Role of Spatially-Dependent Time Preference in Improved Rice Technology Adoption Decisions," 2021 Conference, August 17-31, 2021, Virtual 315286, International Association of Agricultural Economists.
    16. Blanco, Esther & Lopez, Maria Claudia & Villamayor-Tomas, Sergio, 2015. "Exogenous degradation in the commons: Field experimental evidence," Ecological Economics, Elsevier, vol. 120(C), pages 430-439.
    17. Rayner Tabetando, 2019. "Parental risk aversion and educational investment: panel evidence from rural Uganda," Review of Economics of the Household, Springer, vol. 17(2), pages 647-670, June.
    18. Omotuyole Isiaka Ambali & Francisco Jose Areal & Nikolaos Georgantzis, 2021. "On Spatially Dependent Risk Preferences: The Case of Nigerian Farmers," Sustainability, MDPI, vol. 13(11), pages 1-16, May.
    19. Nilanjan Dutta & Arshinder Kaur, 2023. "Enabling socially responsible operations: A decision-making model for a firm contracting with decision-biased smallholders," Annals of Operations Research, Springer, vol. 320(1), pages 509-533, January.
    20. Smith, V. & De Pinto, A. & Robertson, R., 2018. "The Role of Risk in the Context of Climate Change, Land Use Choices and Crop Production: Evidence from Zambia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277315, International Association of Agricultural Economists.
    21. Pamela Katic & Tim Ellis, 2018. "Risk aversion in agricultural water management investments in Northern Ghana: experimental evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 49(5), pages 575-586, September.
    22. Julia Ihli, Hanna & Chiputwa, Brian & Winter, Etti & Gassner, Anja, 2022. "Risk and time preferences for participating in forest landscape restoration: The case of coffee farmers in Uganda," World Development, Elsevier, vol. 150(C).

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