Risk preference, trust, and willingness-to-accept subsidies for pro-environmental production: an investigation of hog farmers in China

Abstract

The objectives of this study are to investigate Chinese hog farmers’ minimum willingness-to-accept (WTA) subsidies for complying pro-environmental (i.e., safe meat) production, and to explore the factors that affect farmers’ WTA, paying a special attention to the role of risk preference and trust. A double-bounded dichotomous choice (DBDC) approach is used to analyze farmers’ WTA for complying three different hypothetical policy scenarios: the first scenario with delayed and uncertain subsidies, the second scenario with delayed but certain subsidies, and the third scenario with certain and immediate subsidies. Within the DBDC maximum-likelihood estimation framework, we further simultaneously explore how these three scenarios and social-demographic characteristics (e.g., risk preference and trust) affect farmers’ WTA. The data for empirical analysis are collected from 712 hog farmers in Henan and Anhui provinces of China. Our findings indicate that the compromised effectiveness of the current subsidy policy targeting harmless treatment of dead hogs is mainly due to the delayed payment, rather than low subsidy levels. Thus, the policy focus should be given to the pathways that help to simplify the miscellaneous procedures causing the delayed subsidy payments. Our estimates also show that farmers’ trust to the local government affects farmers’ WTA significantly, but their risk preferences do not. In particular, we find that hog farmers with higher trust levels require lower subsidies, suggesting that disseminating the subsidy program via personal networks might be more useful than through government propagandas.