Risk Preferences Under Heterogeneous Environmental Risk
Leuphana University of Lueneburg - Dept. of Economics
Martin F. Quaas
University of Kiel - Faculty of Economics and Social Sciences
Max Planck Institute for Meteorology
Leuphana University of Lüneburg - Dept. of Sustainability Sciences and Dept. of Economics
May 15, 2012
We study risk preferences and their determinants for commercial cattle farmers in Namibia who are subject to high precipitation risk that is heterogeneous across farms. We use data on risk preferences from questionnaire and field experiments, simulated data for on-farm precipitation risk and data on famers’ previous place of residence. We find that, on average, less risk-averse farmers operate farms with higher precipitation risk. Moreover, the longer farmers experience a given precipitation risk in early life the more risk-averse they are. These findings suggest self-selection and malleability of risk preferences, respectively.
Number of Pages in PDF File: 46
Keywords: risk preferences, environmental risk, experimental elicitation, malleability of preferences, self-selection, field experiment
JEL Classification: D81, Q12working papers series
Date posted: August 3, 2011 ; Last revised: December 11, 2012
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