Non-farm Income,Technical Characteristics And Risk Aversion

Using traditional economic terminology, it would seem that the availability of a new production technology (in addition to the old one)----ernbodied in the use of hybrid seeds or new crops, fertilizers, pesticides and proper timing of production activities----presents the farmer with a typical portfolio selection problem:The choice of an optimal mixture of risky activities differing in both riskness and expected returns. But unlike the simple portfolio problem, the farmer has some degree of control on both the level of risk and the mean return, through the use of inputs such as fertilizer. The standard results of the theory of the firm may be not still valid under these conditions. However, the individual farmer has to face to the uncertainty in high-risk agriculture. Risk aversion is often modeled as the curvature of the expected utility function, where utility is defined at the initial level of wealth. The risk-averse decision maximizes the expected utility but not the profit. So that it may have a negative effect on the production and income inequalityAs the accelerating pace of development, the structure of farmers’household income has been greatly changed. Income diversification:non-farm activity (in wage employment and self-employment) by farm households has increased. The non-farm incomes may have an significantly impact on the farmers’ risk aversion. Risk preferences can predict a farmer’s investment decisions of new technology and market opportunities. We hypothesize that farmers’risk preferences are a key determinant of their pesticide use decisions. Because of the uncertainty, the farmers are reluctant to adopt new technology, or to portfolio their breed. The technical characteristics itself may either have an effect on the adoption of new technology. In this paper, Risk and risk-aversion are used to explain differences in input use and the relative rate of adoption of modern technologies by farmers of different non-farm income level and different technical characteristics finding out that how are factor use and output mix affected by attitudes towards risk. Besides, the factors affected the technology adoption can be hypothesized into technical characteristics and non-technical characteristics, we try to explain the impact on technical characteristics towards the farmers’ risk aversion.Analyzing based on the empirical study, there are some main conclusions:Farmers’gender, age, risk preferences, birthplace etc. may have a positive effect on risk aversion when non-farm incomes do existed; the social-economic factors have a negative impact on farmers without non-farm income.As for the technical characteristics, the demonstration, expected profit, disease resistance and the guidance of the technology have a significantly negative effect on risk aversion, but the growth circle has a positive effect. The non-technical characteristics can be divided into social-economic characteristics, factor endowments and the risk perception, In the social-economic characteristics, gender and education have a negative effect on risk aversion, then age has a positive impact. In the factor endowments, the liquid labor and farm size have a positive impact, but household income has a negative effect on risk aversions. In the risk perceptions, organization of farmers has a positive effect on risk aversion when the availability to capital has a negative effect.