Impact of Risk on HYV Adoption in Bangladesh

Abstract

AbstractThe objectives of this paper are to develop a measure of risk aversion based on the safety‐first principle. The risk coefficient for a large number of farmers was positive indicating the tendency towards gambling in Bangladesh agriculture. Farmers who were near subsistence income (disaster level of income) tended to choose riskier crops such as HYV rice. The risk‐aversion variable was highly correlated with demographic and socioeconomic variables. Large holders of land tended to be relatively more risk‐averse than small holders of land and area allocated to HYV proportionally declined with increases in holding size.A three‐equation model on HYV adoption decisions, fertilizer and hired labour was estimated with a risk‐aversion variable based on the safety‐first principle, and expected and significant signs were obtained with the risk‐aversion variable in HYV and hired labour equations.