RISK PREFERENCES AND RESOURCE ALLOCATION DIFFERENTIALS OF FOOD CROP FARMERS

Kabir K. Salimonu and Abiodun O. Falusi

Journal of Rural Economics and Development, 2007, vol. 16, 12

Abstract: Apprehension of risk induces certain behaviour into a farmer and this would grossly affect enterprise selection and consequently his resource use and allocation pattern. In this study, risk preferences of food crop farmers in Osun State were measured and efficient resource use and allocation patterns were modeled and suggested. Data from 165 farmers, obtained using a two-stage sampling procedure were used in the study. Analytical tools were descriptive statistics, Risk Behavioural Model (RBM) and Target Minimization of Total Absolute Deviation (T-MOTAD). Risk averse farmers were 144 representing 87.3 percent while the risk preferers were 21 representing 12.7 percent. However risk preference was higher among the males, farmers with larger farm sizes and smaller household sizes. Efficient utilization of labour and borrowed capital was discovered among the risk preferers than the risk averters; hence a significant difference existed in their returns (P< 0.01). It is recommended that farm management research and the extension packages should be channel to the farmers while considering the socio-economic environments that characterize their risk preferences.

Keywords: Production Economics; Resource/Energy Economics and Policy; Risk and Uncertainty (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ngjred:147513

DOI: 10.22004/ag.econ.147513

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