The Impact of Shocks on Risk Preference Changes between Seasons for Smallholder Farmers in Vietnam

Previous studies emphasize that shocks can cause households to fall into poverty traps and to remain there because of risk aversion, yet to date there has been no attempt to discern whether shocks increase risk aversion over time in a developing country. We examine whether shocks increase risk aversion from the lean season to the harvest season among smallholder farmers in northwestern Vietnam. The risk preference elicitation techniques encompass a non-hypothetical lottery game and six hypothetical methods. Except for one assessment method, risk preferences are not stable. The influence of shocks on risk preference changes varies depending on the elicitation method. We find evidence that shocks for which the government provides far-reaching ex-post support – namely, drought and widespread livestock deaths – do not increase risk aversion, while shocks the government provides no such assistance for – namely, illness, death, flooding, or yield loss from pests – increase risk aversion. This indicates that government policies may be able to prevent individuals’ risk aversion from increasing over time from shocks.


Issue Date:
2013
Publication Type:
Conference Paper/ Presentation
DOI and Other Identifiers:
Record Identifier:
https://ageconsearch.umn.edu/record/156101
PURL Identifier:
http://purl.umn.edu/156101
Total Pages:
15
Series Statement:
Schriftlicher Beitrag
B4




 Record created 2017-04-01, last modified 2020-10-28

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