Accounting for farmers’ risk preferences in investigating land allocation decisions in marginal environments: a test of various elicitation measures in an application from Vietnam
Smallholder farmers’ land allocation decisions in marginal areas of developing countries typically involve a substantial element of risk, especially when they concern input intensive cash crops. Hence, apart from farmers’ resource endowment, their individual level of risk aversion is a potentially important determinant of such decisions. However, in microeconometric models a measure of individuals’ risk preferences is usually lacking. We address this shortcoming by testing the explanatory power of a wide range of risk preference measures based on hypothetical and non-hypothetical elicitation methods in a model explaining land allocation to commercial hybrid maize production in a fragile upland area of Vietnam. Based on data collected in a random sample of 300 households, we find that the poorest farmers are particularly specialized in commercial maize production, but they are highly dependent on relatively disadvantageous input supply and marketing arrangements offered by maize traders, making this specialization particularly risky. Our study confirms the relevance of decision-makers’ risk preferences in addition to their asset endowment in the land allocation decision. The inclusion of risk preference measures as explanatory variables is found to not cause any significant endogeneity bias. However, only risk preference measures that are based on hypothetical maize related scenarios have explanatory power. We conclude that (1) risk preferences are to a certain extent decision domain specific and (2) hypothetical scenarios that are closely related to farmers’ real-life decisions may produce more reliable results than unfamiliar, non-agricultural scenarios or lottery-based methods, which may be difficult to grasp for respondents with limited formal education.
|Date of creation:||2012|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.iaae-agecon.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steffen Andersen & Glenn Harrison & Morten Lau & E. Rutström, 2009.
"Elicitation using multiple price list formats,"
Springer, vol. 12(3), pages 365-366, September.
- Alma Cohen & Liran Einav, 2005.
"Estimating Risk Preferences from Deductible Choice,"
NBER Working Papers
11461, National Bureau of Economic Research, Inc.
- Alma Cohen & Liran Einav, 2007. "Estimating Risk Preferences from Deductible Choice," American Economic Review, American Economic Association, vol. 97(3), pages 745-788, June.
- Alma Cohen & Liran Einav, 2005. "Estimating Risk Preferences from Deductible Choice," Discussion Papers 04-031, Stanford Institute for Economic Policy Research.
- Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2006.
"Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally Validated Survey,"
252, European University Viadrina Frankfurt (Oder), Department of Business Administration and Economics.
- Marco Caliendo & Frank Fossen & Alexander Kritikos, 2009. "Risk attitudes of nascent entrepreneurs–new evidence from an experimentally validated survey," Small Business Economics, Springer, vol. 32(2), pages 153-167, February.
- Marco Caliendo & Frank M. Fossen & Alexander S. Kritikos, 2006. "Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey," Discussion Papers of DIW Berlin 600, DIW Berlin, German Institute for Economic Research.
- Caliendo, Marco & Fossen, Frank M. & Kritikos, Alexander S., 2006. "Risk Attitudes of Nascent Entrepreneurs: New Evidence from an Experimentally-Validated Survey," IZA Discussion Papers 2168, Institute for the Study of Labor (IZA).
- Lisa R. Anderson & Jennifer M. Mellor, 2008.
"Are Risk Preferences Stable? Comparing an Experimental Measure with a Validated Survey-Based Measure,"
74, Department of Economics, College of William and Mary.
- Lisa Anderson & Jennifer Mellor, 2009. "Are risk preferences stable? Comparing an experimental measure with a validated survey-based measure," Journal of Risk and Uncertainty, Springer, vol. 39(2), pages 137-160, October.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
- Gloede, Oliver & Menkhoff, Lukas & Waibel, Hermann, 2011. "Risk attitude and risk behavior: Comparing Thailand and Vietnam," Proceedings of the German Development Economics Conference, Berlin 2011 33, Verein für Socialpolitik, Research Committee Development Economics.
- Simon Fietze & Elke Holst & Verena Tobsch, 2011.
"Germany’s Next Top Manager: Does Personality Explain the Gender Career Gap?,"
management revue. Socio-economic Studies,
Rainer Hampp Verlag, vol. 22(3), pages 240-273.
- Simon Fietze & Elke Holst & Verena Tobsch, 2010. "Germany’s Next Top Manager: Does Personality explain the Gender Career Gap?," Danish-German Working Papers 003, University of Flensburg, International Institute of Management (IIM);University of Southern Denmark, Department of Border Region Studies (IFG).
- Fietze, Simon & Holst, Elke & Tobsch, Verena, 2010. "Germany's Next Top Manager: Does Personality Explain the Gender Career Gap?," IZA Discussion Papers 5110, Institute for the Study of Labor (IZA).
- Feder, Gershon & Just, Richard E & Zilberman, David, 1985. "Adoption of Agricultural Innovations in Developing Countries: A Survey," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 255-98, January.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Zeller, Manfred & Sharma, Manohar & Henry, Carla & Lapenu, Cecile, 2006. "An operational method for assessing the poverty outreach performance of development policies and projects: Results of case studies in Africa, Asia, and Latin America," World Development, Elsevier, vol. 34(3), pages 446-464, March.
- von Braun, Joachim, 1995. "Agricultural commercialization: impacts on income and nutrition and implications for policy," Food Policy, Elsevier, vol. 20(3), pages 187-202, June.
- Elisabet Rutstrom & Glenn Harrison & Morten Lau, 2004.
"Estimating risk attitudes in denmark: A field experiment,"
Artefactual Field Experiments
00059, The Field Experiments Website.
- Glenn W. Harrison & Morten I. Lau & E. Elisabet Rutström, 2007. "Estimating Risk Attitudes in Denmark: A Field Experiment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(2), pages 341-368, 06.
- Minot, Nicholas & Epprecht, Michael & Anh, Tran Thi Tram & Trung, Le Quang, 2006. "Income diversification and poverty in the Northern Uplands of Vietnam:," Research reports 145, International Food Policy Research Institute (IFPRI).
- Pingali, Prabhu L. & Rosegrant, Mark W., 1995. "Agricultural commercialization and diversification: processes and policies," Food Policy, Elsevier, vol. 20(3), pages 171-185, June.
- Keil, Alwin & Zeller, Manfred & Heidhues, Franz & Dung, Pham Thi My & Saint-Macary, Camille, 2010. "Land titling policy and soil conservation in the northern uplands of Vietnam," Economics Papers from University Paris Dauphine 123456789/11412, Paris Dauphine University.
- Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-71, March.
When requesting a correction, please mention this item's handle: RePEc:ags:iaae12:126054. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If references are entirely missing, you can add them using this form.