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Farmers risk preferences and risk management practices
The agricultural sector faces multiple and increasing risks including climate change, institutional changes, and production and market risks. In this context, farmers’ attitudes towards risks may influence their decisions. The objective of this master thesis is to analyze the extent to which risk preferences explain actual farm behavior, focusing on risk management practices.
The agricultural sector faces multiple and increasing risks, such as climate change, institutional changes, and production and market risks. They can mitigate these risks through risk management practices. In this context, farmers’ attitudes towards risks may have greater implications for on-farm economic decisions, such as the choice of risk management tools (Meraner and Finger, 2019). Risk-averse farmers, for example, are expected to have higher levels of insurance take-up and contracts that reduce risk exposure (e.g., Pennings and Smidts, 2000). However, empirical evidence shows mixed results, often highlighting the weak explanatory power of risk preferences (Menapace, et al, 2016; Ogurtsov, et al, 2009). Among the various reasons for this pattern is the diversity of methods for eliciting risk preferences (e.g., lotteries, self-assessments, observed risk behavior). For this reason, it is important to analyze the potential of risk preferences to predict farm decisions.
References
Menapace, L., Colson, G., & Raffaelli, R. (2016). A comparison of hypothetical risk attitude elicitation instruments for explaining farmer crop insurance purchases. European Review of Agricultural Economics, 43(1), 113-135.
Meraner, M., & Finger, R. (2019). Risk perceptions, preferences and management strategies: evidence from a case study using German livestock farmers. Journal of Risk Research, 22(1), 110-135.
Ogurtsov, V. A., van Asseldonk, M. A., & Huirne, R. B. (2009). Purchase of catastrophe insurance by Dutch dairy and arable farmers. Applied Economic Perspectives and Policy, 31(1), 143-162.
Pennings, J. M., & Smidts, A. (2000). Assessing the construct validity of risk attitude. Management Science, 46(10), 1337-1348.
The agricultural sector faces multiple and increasing risks, such as climate change, institutional changes, and production and market risks. They can mitigate these risks through risk management practices. In this context, farmers’ attitudes towards risks may have greater implications for on-farm economic decisions, such as the choice of risk management tools (Meraner and Finger, 2019). Risk-averse farmers, for example, are expected to have higher levels of insurance take-up and contracts that reduce risk exposure (e.g., Pennings and Smidts, 2000). However, empirical evidence shows mixed results, often highlighting the weak explanatory power of risk preferences (Menapace, et al, 2016; Ogurtsov, et al, 2009). Among the various reasons for this pattern is the diversity of methods for eliciting risk preferences (e.g., lotteries, self-assessments, observed risk behavior). For this reason, it is important to analyze the potential of risk preferences to predict farm decisions.
References
Menapace, L., Colson, G., & Raffaelli, R. (2016). A comparison of hypothetical risk attitude elicitation instruments for explaining farmer crop insurance purchases. European Review of Agricultural Economics, 43(1), 113-135.
Meraner, M., & Finger, R. (2019). Risk perceptions, preferences and management strategies: evidence from a case study using German livestock farmers. Journal of Risk Research, 22(1), 110-135.
Ogurtsov, V. A., van Asseldonk, M. A., & Huirne, R. B. (2009). Purchase of catastrophe insurance by Dutch dairy and arable farmers. Applied Economic Perspectives and Policy, 31(1), 143-162.
Pennings, J. M., & Smidts, A. (2000). Assessing the construct validity of risk attitude. Management Science, 46(10), 1337-1348.
Research question: i) do risk preferences explain the uptake of risk management practices? ii) how does the explanatory power of risk preferences vary across elicitation methods of risk preferences?
The research will comprise a literature review and statistical and econometric analysis of a unique dataset comprising farmers from 11 European countries across farm types (e.g., mixed, arable, livestock) and production systems. The thesis offers Master students the opportunity to understand the underlying mechanisms of farmers decision making with a focus on risk management decisions.
Research question: i) do risk preferences explain the uptake of risk management practices? ii) how does the explanatory power of risk preferences vary across elicitation methods of risk preferences? The research will comprise a literature review and statistical and econometric analysis of a unique dataset comprising farmers from 11 European countries across farm types (e.g., mixed, arable, livestock) and production systems. The thesis offers Master students the opportunity to understand the underlying mechanisms of farmers decision making with a focus on risk management decisions.
Robert Finger (rofinger@ethz.ch), Chloe McCallum (cmccallum@ethz.ch), Viviana Garcia (vgarci@ethz.ch)
Robert Finger (rofinger@ethz.ch), Chloe McCallum (cmccallum@ethz.ch), Viviana Garcia (vgarci@ethz.ch)