Risk Preferences Under Heterogeneous Environmental Risk
46 Pages Posted: 3 Aug 2011 Last revised: 28 Jan 2014
Date Written: May 15, 2012
Abstract
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.
Keywords: risk preferences, environmental risk, experimental elicitation, malleability of preferences, self-selection, field experiment
JEL Classification: D81, Q12
Suggested Citation: Suggested Citation
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