Risk Aversion By Small Farmers- Can It Be Measured ?results Of A Survey Of 69 Small Farmers In Kabare Location, Kirinyaga District, March 1977

Abstract

Small farmers in developing countries have to contend with many risks. One of the most important is the risk of less than adequate rainfall. Risk aversion by farmers can be a constraint on the transition from a subsistence. to a cash economy. This paper describes a survey of small farmers in Kabare Location, Kirinyaga District, Kenya which was conducted during March,1977. Results of the survey were used to attempt to measure the farmers' risk aversion. An index of risk aversion was constructed and used to test hypotheses concerning the characteristics of more and less risk averse farmers. The area of the survey fell into three distinct ecological zones, and the most significant result was the striking interzonal difference in mean values of the index of risk aversion, with farmers in the lower zones being progressively more risk averse. Other results were that (a) In the upper zone, farmers with a smaller regular workforce tended to be more risk averse. This was also true to a lesser extent in the middle zone. (b) In the middle zone, farmers who had attended Farmers' Training Centres were less risk averse. Also farmers on divided farms were less risk averse. (c) In the lower zone, farmers who had attended other training apart from at school or Farmers' Training Centre were mere risk averse. Also farmers who grew a high proportion of mixed crops were less risk averse. Risk aversion seemed to play a more important part in decision-making in the lower two zones. In the upper zone, the farming was more commercial, and there was little rainfall risk. It is hoped to refine the technique of constructing the index of risk aversion9 and that it may be useful in future research in agriculture in developing countries. Some implications of the study f'or policy decisions are discussed.