Working Papers

Risk Aversion and Farm Input Choice: Evidence from Field Experiments in China

Yazhen Gong, Renmin University of China
Kathy Baylis, University of Illinois at Urbana-Champaign
Jintao Xu, Peking University
Robert Kozak, University of British Columbia
Gary Bull, University of British Columbia


Overuse of fertilizer and pesticides is a substantial source of water pollution in China, and reducing chemical input use is a government policy objective. Using data on risk aversion from field experiments in the Yunnan Province of southwestern China, we ask how risk attitudes affects farm input choice. Major findings in our paper include: [1] as expected, most of our 300 farmers exhibit substantial risk aversion; [2] risk aversion affects input intensity differently for market-oriented versus subsistence farmers. [3] risk aversion is related with the increased use of pesticides by market-oriented producers, but a reduction of pesticide use by subsistence farmers; and [4] market producers are more concerned with stabilizing income, while subsistence producers are more concerned with stabilizing production.

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