Title: How Well Do Farmers Tolerate Risk? Comparisons with Nonfarm Business Owners and the General Population
Abstract: Few would disagree that farmers face substantial risks from Mother Nature and markets alike, and that farmers must make crucial decisions balancing risk and reward on a regular basis. However, little consideration has been given to how the risk endemic to farming has shaped who has entered and stayed in farming and the risk tolerance of the farmers that remain. For example, has the constant exposure to and experience with risk made U.S. farmers better able to tolerate risk than the general population? Have government programs designed to help manage and mitigate farm risk allowed farmers with less tolerance for risk to survive where those with similar risk tolerance in nonfarm businesses may have exited? Are there other distinct features of the farming sector, such as specialized assets, inheritance, or land wealth, that interact with occupational sorting to affect the distribu tion of risk tolerance among farmers? Risk Attitudes, Self-Employment, and Farming One view of the role that risk attitudes play within the economy is that individual risk attitudes influence the gen esis of firms and, hence, industrial organization (Knight, 1921). Specifically, risk-tolerant individuals seek entre preneurial activities such as owning a small business or becoming otherwise self-employed, while the risk intolerant gravitate toward employee status. Several studies have validated this logic using a variety of different data sets and indicators for risk tolerance (Cramer et al., 2002; van Praag and Cramer, 2001; Xiao et al., 2001; and Hvide and Panos, 2013), though none have explored differences between farming and other occupations. This is critical because farming differs from other forms of small business owner
Publication Year: 2013
Publication Date: 2013-12-12
Language: en
Type: article
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Cited By Count: 8
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