Risk Aversion, Crop Diversification, and Food Security

Abstract

This paper investigates the relationship between risk aversion, crop diversification, and food security. In poor agrarian countries, farmers’ risk aversions are inherently linked to their food security. However, there is a lack of empirical evidence to understand the mechanism through which risk aversion operates, affecting food security. Using field experiment data from rural Ethiopia, our mediation analysis reveals that crop diversity is a mechanism by which farmers’ risk aversion negatively influences food security. Our findings illuminate the importance of considering farmers’ risk preferences to develop effective policies that promote crop diversification among poor smallholder farmers to reduce food insecurity.

Keywords: Risk Aversion, Food Security, Crop Diversity

JEL Classification: O13, O14, O55, Q12