Risk preferences and crop diversification amongst smallholder farmers in Burkina Faso

The literature considers crop diversification a risk management strategy at the farm level. In this article, we combine experimental data on risk aversion with survey data to identify the extent to which risk aversion affects crop diversification decisions. We conduct experiments to measure the risk aversion of smallholder farmers in Burkina Faso and a field survey to gather data on various socio-economic variables. To measure crop diversification, we use three indices of spatial diversity in crop species adapted from the ecological economics literature, i.e., the count index, the Herfindahl index measure of crop concentration and the Shannon index of evenness. An Ordinary Least square (OLS) model is used to estimate the impact of risk aversion on crop diversification when the count index is used as the dependent variable, whereas a Tobit model is used for the Herfindahl index and the Shannon index. Our results show that risk aversion has a negative and significant effect on crop diversification. Although the effect is significant for all diversity indexes, the magnitude of the effect differs among them. Other variables also affect crop diversification. In particular, education level, distance to market, farm area and land fragmentation are associated with greater crop diversification.

Issue Date:
Jun 19 2017
Publication Type:
Conference Paper/ Presentation
Total Pages:
JEL Codes:
C93; D13; G11; Q12; Q57

 Record created 2017-06-27, last modified 2017-08-29

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