Abstract
This article investigates the power of individual risk preference in combination with socio-economic and demographic characteristics to predict ten agricultural field behaviours in a developing country. A sample of 163 farmers from western-central Bhutan was interviewed regarding their farm management practices. Their risk preference was then experimentally elicited using a modified Multiple Price List. The results show farm size as being a primary determinant of income diversification, nitrogenous fertiliser application, and pesticide use. Farm diversification is most dependent on the household head’s level of education and the quantity of farm labour available. Finally, both income diversification and farm diversification are shown to have an inverse relationship with loss risk aversion. On the basis of the findings of this article, agricultural policy and programmes can increase their efficacy and efficiency by targeting agrarian Bhutanese households based on their characteristics.
Highlights
Businesses in all sectors of the economy are presented with production risk
The Lottery Choice Task (LCT) this study developed was constructed of decisions which are stacked in rows with two columns labelled ‘Option A’ and ‘Option B’
Clustering for income diversification metrics Berry index (BI)-I and Shannon-Wiener entropy measure (SWEM)-I shows that 15% of households only had one income source during 2017
Summary
Businesses in all sectors of the economy are presented with production risk. With risk emerging from a multitude of sources, agriculture is no exception [1]. Understanding the determinants of field behaviours in a developing country where there is a heavy reliance on agriculture is crucial for forecasting the impact of climatic and economic shifts. It is beneficial for designing effective policy interventions which can act to stabilise food prices and incomes while mitigating any undesirable effects of such changes [8]. This is the first study with the aim of predicting farmers’ field behaviours within Bhutan, and it adds to a growing body of literature globally
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