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The Impact of Shocks on Risk Preference Changes between Seasons for Smallholder Farmers in Vietnam

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  • Nielsen, Thea
  • Zeller, Manfred

Abstract

Previous studies emphasize that shocks can cause households to fall into poverty traps and to remain there because of risk aversion, yet to date there has been no attempt to discern whether shocks increase risk aversion over time in a developing country. We examine whether shocks increase risk aversion from the lean season to the harvest season among smallholder farmers in northwestern Vietnam. The risk preference elicitation techniques encompass a non-hypothetical lottery game and six hypothetical methods. Except for one assessment method, risk preferences are not stable. The influence of shocks on risk preference changes varies depending on the elicitation method. We find evidence that shocks for which the government provides far-reaching ex-post support – namely, drought and widespread livestock deaths – do not increase risk aversion, while shocks the government provides no such assistance for – namely, illness, death, flooding, or yield loss from pests – increase risk aversion. This indicates that government policies may be able to prevent individuals’ risk aversion from increasing over time from shocks.

Suggested Citation

  • Nielsen, Thea & Zeller, Manfred, 2013. "The Impact of Shocks on Risk Preference Changes between Seasons for Smallholder Farmers in Vietnam," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156101, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi13:156101
    DOI: 10.22004/ag.econ.156101
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    Cited by:

    1. Bauermeister, Golo & Musshoff, Oliver, 2016. "Risk Aversion and Inconsistencies - Does the Choice of Risk Elicitation Method and Display Format Influence the Outcomes?," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235348, Agricultural and Applied Economics Association.
    2. Bozzola, Martina & DiFalco, Salvatore & Finger, Robert, 2017. "Time variant risk preferences in agriculture: evidences from Italy," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258365, Agricultural and Applied Economics Association.
    3. Golo-Friedrich Bauermeister & Oliver Mußhoff, 2016. "Konstante Wahrscheinlichkeiten vs. konstante Auszahlungsbeträge: Auswirkungen auf die ermittelte Risikoeinstellung und beobachtete Inkonsistenzrate in lotteriebasierten Experimenten [Probability Eq," Schmalenbach Journal of Business Research, Springer, vol. 68(2), pages 145-166, July.

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