Abstract
Although rice has been a prominent cash crop in areas with access to lowland in Uganda, the adoption of rice and area expansion have stagnated despite the Government of Uganda’s 2009 National Rice Development Policy and its commitment to doubling rice production over 10 years. Using panel data collected in 2010 and 2017 as well as risk preference data elicited via lab-in-the-field experiments conducted in rural Uganda, we find that farmers with higher loss aversion are less likely to grow rice and expand their rice cultivation areas. This study affirms that risk preferences play a critical role in agricultural production decisions.
Highlights
Many studies have examined why apparently profitable technology is not adopted
This study examined whether risk-taking decisions are explained by risk preferences elicited by lab-in-the-field experiments in rural Uganda conducted in 2017, when many households were affected by severe drought
Under rainfed conditions in which agricultural production is subject to high risk, households’ risk attitudes are expected to influence crop choices because each crop is associated with a different risk level
Summary
Many studies have examined why apparently profitable technology is not adopted. While theoretical studies have attributed low technology adoption in developing countries to many factors, high risk-aversion is one of them [1,2]. Several empirical studies test their theoretical predictions using household assets and educational attainment as proxies for risk aversion since they are key determinants of it [3,4]. Other studies have adopted survey-based methods whereby hypothetical choice questions with different degrees of risk are used to measure risk aversion [5]. Since the survey-based method is not incentive-compatible, self-reported personal attitudes and traits may not capture actual risk preference levels [6]. Studies have attempted to measure risk aversion using experimental methods [7]
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