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Why farmers sometimes love risks: evidence from India

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journal contribution
posted on 2023-06-08, 17:54 authored by Annemie MaertensAnnemie Maertens, Amalavoyal ChariAmalavoyal Chari, David R Just
Using a unique data set collected among farmers in India’s semiarid tropics, we document the surprising prevalence of risk-taking behavior in the face of realistically framed high-stakes gambles. We hypothesize that this apparently anomalous behavior is due to a combination of credit constraints and nonconvexities in production. In particular, the high-stakes nature of the gambles creates the potential for a farmer to undertake a productive investment that would normally be unaffordable and thereby move to a permanently higher level of income. We show that the degree to which farmers are willing to accept risk in return for this opportunity appears to relate in an intuitive way to their current agricultural production technology as well as the demographic composition of their household.

History

Publication status

  • Published

File Version

  • Published version

Journal

Economic Development and Cultural Change

ISSN

0013-0079

Publisher

University of Chicago Press

Issue

2

Volume

62

Page range

239-274

Department affiliated with

  • Economics Publications

Full text available

  • Yes

Peer reviewed?

  • Yes

Legacy Posted Date

2014-07-29

First Open Access (FOA) Date

2015-02-01

First Compliant Deposit (FCD) Date

2014-07-29

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