Why farmers sometimes love risks: evidence from India

Maertens, Annemie, Chari, A V and Just, David R (2014) Why farmers sometimes love risks: evidence from India. Economic Development and Cultural Change, 62 (2). pp. 239-274. ISSN 0013-0079

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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.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HD Industries. Land use. Labour > HD0072 Economic development. Development economics. Economic growth
Depositing User: Amalavoyal Chari
Date Deposited: 29 Jul 2014 08:31
Last Modified: 06 Mar 2017 13:09
URI: http://srodev.sussex.ac.uk/id/eprint/49371

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