Risk preferences, adoption and welfare impacts of multiple agroforestry practices

Abstract

Despite growing literature on the impact of agroforestry practices on livelihoods and welfare, studies that account for the multiplicity of agroforestry practices, which may be governed by farmers' divergent risk and time preferences are lacking. This is especially the case for agro-silviculture and silvopasture agroforestry systems that entail significant fixed and management costs in which farmers' risk tolerance and patience may play a big role in adoption decisions. In this paper, we first explore the effect of farmers' risk and time preferences on the uptake of multiple agroforestry practices (MAPs). Then, we examine whether the multiplicity of agroforestry practices increases farmers' income using multinomial endogenous switching regression. We find farmers' risk and time preferences significantly govern the adoption of agroforestry practices, with risk-averse farmers and farmers with lower discount rates more likely to adopt MAPs. More importantly, the complementarity and importance of adopting MAPs is highlighted by the 29% increase in income of farmers who practice both agro-silviculture and silvopasture. This result highlights the more important role of integrated agroforestry that creates synergy for welfare improvement.