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On Spatially Dependent Risk Preferences: The Case of Nigerian Farmers

Omotuyole Isiaka Ambali, Francisco Areal and Nikolaos Georgantzís ()
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Omotuyole Isiaka Ambali: Department of Agricultural Economics and Farm Management, Ayetoro Campus, College of Agricultural Sciences, Olabisi Onabanjo University, Ago Iwoye PMB 0012, Nigeria

Sustainability, 2021, vol. 13, issue 11, 1-16

Abstract: Rice farmers’ attitudes toward risk-taking have been identified as one of the factors affecting investment decisions and wealth accumulation. While existing studies have identified the socio-economic factors driving farmers’ risk attitudes, spatial variables that may correlate with decisions are often ignored in the risk models due to difficulties in measurement. We studied unobserved spatial heterogeneity in farmer’s risk preferences by incorporating spatial dependency into a farmer’s risk preference model. We used data from a survey conducted with Nigerian farmers between March and May 2016. The survey collected information on 2016 farmers’ socio-demographic characteristics and farm attributes including its geographical location as well as information on the quality of roads. In addition, a set of experiments design to elicit famers’ attitudes toward risk were conducted. We estimated a spatial autoregressive model using the instrumental variable method. We found that unobserved spatial heterogeneity (e.g., soil, topographic farmers emulating each other) was present in farmer’s risk preferences along with socio-demographic variables such as age, gender, marital status, and religion and farm characteristics such as farm size and road quality. These results are relevant for policy decision-making processes.

Keywords: decision making; instrumental variable; neighbourhood effects; rice farmers; risk attitudes; spatial dependence (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2021
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