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Impact of development interventions on individual risk preferences: Evidence from a field-lab experiment and survey data

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  • Pace, Noemi
  • Daidone, Silvio

Abstract

In rural settings, individual risk preferences represent one of the channels driving the shift from low-return/low-risk activities towards high-return/high-risk activities. This study takes advantage of data collected for the impact evaluation of the Child Grants Programme, an unconditional cash transfer program, and the Sustainable Poverty Reduction through Income, Nutrition and Access to Government Services (SPRINGS) project, a community development package, in rural Lesotho. The paper has two major goals. First, we investigate the effects of the programs on risk preferences measured via laboratory experiments in the field and a survey instrument. Second, we perform a mediation analysis to quantify the extent to which the programs affect risky investment decisions in real life through changes in risk preferences. Results show that the combination of programs decreases risk aversion, partially mediating the impact of the programs on risky agricultural investment decisions in real life.

Suggested Citation

  • Pace, Noemi & Daidone, Silvio, 2024. "Impact of development interventions on individual risk preferences: Evidence from a field-lab experiment and survey data," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 111(C).
    • Handle: RePEc:eee:soceco:v:111:y:2024:i:c:s2214804324000764
    DOI: 10.1016/j.socec.2024.102238
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    More about this item

    Keywords

    Laboratory experiment in the field; Risk preferences; Cash transfers; Community development interventions;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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