Risk Aversion and Perception of Farmers about Endogenous Risks: An Empirical Study for Maize Producers in Awi Zone, Amhara Region of Ethiopia

Yohannes Girma, Berhanu Kuma () and Amsalu Bedemo
Additional contact information
Yohannes Girma: Department of Agricultural Economics, Injibara University, Injibara P.O. Box 40, Ethiopia
Berhanu Kuma: Research and Community Service Director, Wolaita Sodo University, Wolaita Sodo P.O. Box 138, Ethiopia
Amsalu Bedemo: School of Graduate Studies, Ethiopian Civil Service University, Addis Ababa P.O. Box 5648, Ethiopia

JRFM, 2023, vol. 16, issue 2, 1-29

Abstract: Agriculture is a risky business that is subject to endogenous risks. Endogenous risks caused by input utilization, input affordability and input availability may prove detrimental to the production potential of farmers. The study was aimed at examining the risk perception, risk aversion and risk management strategies of maize producers in Awi zone, which is found in the northwest part of Ethiopia. The study involved 343 respondents who produced maize under risk. Descriptive statistics, a seven-point Likert scale, the observed economic behaviour method, factor analysis and a seemingly unrelated regression model were used to process the data. The results showed that farmers have different perceptions of the endogenous risk associated with input availability and input affordability which has a different probability of occurrence and severity of damage. The observed economic behaviour method showed that farmers in the area also have different risk aversion behaviours: about 7.29% of the respondents in the study area have high risk aversion attitudes, while about 30.61% have medium risk aversion attitudes and 62.10% of them have low risk aversion attitudes. The seemingly unrelated regression model output showed that farmers’ economic, social, demographic and institutional factors, as well as their risk behaviour, determine the risk management strategies that they employ. Maize farmers in the area applied human risk management strategies, production risk management strategies, diversification, financial risk management strategies and marketing risk management strategies to tackle the endogenous risks in the area. It was deduced that maize farmers have a risk averse behaviour even if their risk aversion levels differ based on the scope of the management strategies that they employ to combat risk. Following the finding of the study, a holistic approach to risk management that encompasses all actors, such as farmers, researchers, extension services and financial institutions should be involved to make the appropriate interventions.

Keywords: risk aversion; risk perception; risk management; maize; Ethiopia (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/16/2/87/pdf (application/pdf)
https://www.mdpi.com/1911-8074/16/2/87/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:87-:d:1054421

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().