Edgardo Moscardi and Alain de Janvry, “Attitudes Toward Risk among Peasants: An Econometric Approach,” American Journal of Agricultural Economics 59, no. 4 (Nov. 1977), 710-716.

Notes

• 710 – “If they are going to be effective, new technologies and rural development programs need to be tailored to the attitudes toward risk of particular categories of peasants. For this purpose, it is important to identify the specific determinants of behavior toward risk and to quantify their impact on decision making.”
• “This paper starts by examining the extent to which risk may be responsible for discrepancies between peasants’ demand for fertilizer without risk and actual demand under risky conditions.”
• “Explanations for differential degrees of risk aversion among peasants can then be sought by relating the measures of risk aversion obtained to a number of variables that characterize the peasant household, its income-generating opportunities, and its position in the political economy.”
• 711 – “Since risk aversion is measured as a residual from the behavioral equation (2), it tends to include other sources of discrepancy between optimum and actual resource allocation such as, for example, imperfect market and agronomic information, restricted availability of financial capital and inputs, and high opportunity cost of family labor. In order for the measured K to be a pure measure of risk aversion, the data have to be carefully screened to eliminate observations where such constraints may be effective.”
• 711-12 – “The agronomic information needed to estimate the production function for this new technological package was obtained from the field experiments of corn fertilization carried out by the project agronomists between 1967 and 1971. The data consist of 1,142 observations from twenty-five trials conducted in one of the production systems of the project known as Deep Soils of the Popocatepetl.”
• 715 – “Estimation of risk aversion for a relatively large sample of farmers, following the indirect method outlined above, shows that risk aversion is indeed responsible for substantial differences between the demand for fertilizer without risk and actual demand. Risk premiums are high, discouraging the use of high rates of fertilizer under safety-first behavior.”
• 715-16 – “. . . it is possible to establish a systematic relationship between risk aversion and a number of socioeconomic variables that characterize peasant households, their access to income-generating opportunities, and their relation to public institutions. Knowledge of attitude toward risk for particular categories of peasants defined by these socioeconomic variables makes it possible, in turn, to determine packages of technological and institutional practices optimally tailored to peasants’ economic behavior. Such packages should greatly enhance the chances of success of rural development programs.”