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Risk preferences among small farmers in Sub-Saharan Africa: evidence from laboratory experiments in the field and survey data

27 novembre 2019 ore 12:00 - 14:00

Aula 207, Sede di Viale Romania, 32

Speaker: Noemi Pace, Università Ca-Foscari


In poor rural settings, characterized by inexistent or incomplete insurance and financial markets, individual risk preferences represent one of the channels driving the shift from low-return/low-risk activities towards high-return/high-risk activities. This study takes advantage of the data collection for the evaluation of the impact of an unconditional cash transfers program, the Child Grant Program (CGP), and a comprehensive community development package, the Sustainable Poverty Reduction through Income, Nutrition and Access to Government Services (SPRINGS), in rural Lesotho. The paper has two main goals: 1) Investigate the CGP and CGP+SPRINGS effects on risk preferences: with this analysis we aim to estimate the causal link between inclusion in one of the three treatment arms, i.e. comparison group, exclusive participation into CGP, and participation in both CGP and SPRINGS, and our measures of risk preferences; 2) Investigate whether our measures of risk preferences are correlated with real-life risky choices through a mediation analysis which allows us to disentangle between the direct impact of the programmes on real-life risky choices and the indirect impact mediated by changes in risk preferences. From the analysis of the programmes’ impact on risk preferences we find that participation to CGP and SPRINGS affects both willingness to take risk and risk taking in field lab experiments. From the analysis of the link between risk preferences and real-life risky choices, we find that while our experimental measures are not correlated, risk preferences measured through survey data are good predictors of real-life risky choices. Through a mediation analysis we find that survey measures of risk preferences explain approximately between 6 to 17 percent of the total impact on outcomes in the agricultural domain, and between 2 to 11 percent in the investment domain.

Keywords: Risk Preferences, Cash Transfers, Community Development Interventions, Livelihood Strategies