Citation

Senapati AK. Heliyon 2020; 6(3): e03503.

Affiliation

P.G. Department of Economics, Ravenshaw University, Cuttack 753003, Odisha, India.

Copyright

(Copyright © 2020, Elsevier Publishing)

DOI

10.1016/j.heliyon.2020.e03503

PMID

32181388

PMCID

PMC7066235

Abstract

The present study proposes to analyse farmers' attitudes towards risk and examine the effect of specific socio-demographic and socio-economic characteristics on farmers' risk attitudes in irrigated and rain-fed regions of Odisha, India. A total of 400 randomly selected farmers participated in the experiment. The study applies the Modified Holt and Laury Lottery method for measuring risk attitudes. The majority of the farmers are having a risk-averse attitude and only a few farmers have a risk-taking attitude. One-sixth of the farmers are having risk-neutral decision behavior. The effect of Socio-demographic and socio-economic variables on farmers' risk attitude is also measured using an ordered probit model dealing with risky outcomes. The study reveals a negative relationship between household size and a risk-averse attitude. The study also reveals a negative relationship between off-farm income source and risk-averse attitude. The study also finds that there is an immediate need to improve extension facilities in the study area to train these farmers regarding the best risk management practices for deciding the choice of a particular crop such as growing short-duration crops as well as climate-resistant crop variety. Storage facilities need to be improved and there is an urgent need for improved irrigation systems to increase production particularly in Bolangir district. The result provides government agencies an outline to know how risky farming environment affects farmers' production decisions and designing policies such as crop insurance, weather-based crop insurance and other safety nets that effectively address farmer's problem. The main intention behind this experimental design is to make the policy makers aware of the high degree of risk aversion existing in a rural developing farm setting. Socio-demographic and socio-economic variables can be taken as a reference while implementing policies dealing with risky outcomes.

© 2020 Published by Elsevier Ltd.

Language: en

Keywords

Agriculture; Decision problem; Expected utility; Experiment design; Experimental economics; India; Natural resource economics; Odisha; Risk attitude