Risk Behavior of Small and Marginal Farmers in Cauvery Delta Zone, Tamil Nadu

Abstract

Farmers’ risk preferences play an important role in agricultural production decisions, risk takers means the farmers who are willing to take risky decisions in farming, risk aversion means an attitude of reluctance to take risky decisions in farming. Climatic change effects all regions across the globe and causes substantial agitations that can be expected to be natural systems that have foreseeable influences on the economic systems of upland regions through both direct and indirect means. Risk preferences reflect the farmers’ personal experiences and beliefs, these preferences explain how the decision-maker assesses and react to risks. This study characterizes risk behaviour among marginal and small farmers in Cauvery Delta Zone and determines how these risk preferences affects the farmers. The study was conducted in Cauvery Delta zone of Thanjavur, Thiruvarur and Nagapattinam districts with a Sample size of 366 farmers which consists of 183 marginal and 183 small farmers was selected randomly based on proportionate random sampling method. The risk behavior was measured by the measure of risk attitude and two lottery methods viz., Eckel-Grossman and Holt-Laury based lottery method. Measure of risk attitude results shows that, 27.60 per cent of farmers were moderate risk taker followed by 24.30 per cent were risk averser and 15.00 per cent of farmers were risk taker. The Eckel and Grossman lottery method result shows CRRA (Constant Relative Risk Aversion) value was 0.38 to 0.67, which shows that marginal farmers were risk aversers and small farmers were moderate risk takers. The CRRA adapted from Holt and Laury [1] range for the maximum was 1.37 and minimum -1.71 for their choices. The majority of marginal farmers were risk aversers, the socio-economic characteristics of the farmers decides the risk preference. The risk-averse farmer this may imply risk-taking behavior that is reduced by risk aversion (resulting in on-farm risk management strategies) and a reduced demand of insurance.