Citrus Specialization or Crop Diversification: The Role of Smallholder’s Subjective Risk Aversion and Case Evidence from Guangxi, China

Abstract

Specialization may lead to higher income for small-scale farmers but comes with increased risks, while diversification can mitigate risks and foster agricultural sustainability. Considering the influences of complex risks and farmers’ subjective risk aversion, the decision for small-scale farmers to specialize in citrus cultivation or diversify with multiple crops remains uncertain. There is currently limited understanding of this issue among citrus smallholders in rural China. This study aims to fill this empirical gap by examining the impact of smallholder farmers’ subjective risk aversion on their choice between citrus monoculture and crop diversification. It utilizes a subjective risk assessment approach that incorporates farmers’ risk perceptions and risk attitudes towards citrus farming. Farm crop diversification is assessed through the utilization of both the count index and Shannon index. The empirical analysis employs survey data obtained from citrus growers in Guangxi, China, and applies an instrumental variable regression method with endogeneity consideration using the IV-Probit model and 2SLS model estimation. The results reveal that both risk perceptions and risk attitudes play important roles in citrus smallholders’ land allocation decisions. Specifically, citrus farmers who perceive higher risks and adopt risk-averse attitudes are statistically more inclined to engage in land use diversification practices, including the practice of growing citrus as well as other crops, which contributes to reducing the risks of citrus farming and promoting local environmental conservation. These results contribute to a better scholarly comprehension of the relationship between risk perceptions, risk attitudes, and crop diversification among small-scale citrus farmers. They provide valuable insights for enhancing the sustainability of land use systems with citrus farming while also emphasizing the importance of maintaining essential diversification in small-scale farming throughout the process of agricultural modernization.