Farmers' risk preference and fertilizer use
Fangbin Qiao, Jikun Huang
Abstract
This study examines the role of farmers' risk attitudes toward fertilizer use in cotton production in China. Contradicting previous studies, this paper theoretically shows that the relationship between farmers' risk aversion and fertilizer use is not always monotonic. Field survey data were collected to test this relationship using the Cobb–Douglas production function. Results suggest that when the elasticity of fertilizer use and the probability of achieving the desired effects from fertilizer use are high, risk-averse farmers apply more fertilizer than risk-taking farmers. Conversely, when the elasticity of fertilizer use and the probability of achieving the desired effects are low, risk-taking farmers apply more fertilizer than risk-neutral or risk-averse farmers.