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How does financial literacy affect farmers’ agricultural investments? A study from the perspectives of risk preferences and time preferences

Author

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  • Guihua Liu
  • Yichao Li
  • Dingde Xu

Abstract

The growth of the agricultural economy is inseparable from agricultural investments among farmers. Sadly, Chinese farmers are generally under-invested, and the factors affecting agricultural investments need to be identified. Using data from the China Land Economic Survey (CLES) in 2021, this study examines the effects of farmers’ financial literacy on two types of agricultural investments. The results are as follows: (1) Financial literacy has positive effects on both liquid investments and fixed investments. (2) The effects of financial literacy on liquid investments and fixed investments vary among farmers due to differences in farmland size and insurance purchase. (3) Risk preferences mediate the effects of financial literacy on liquid investments and fixed investments. By contrast, time preferences only play a mediating role in the effect of financial literacy on fixed investments. Therefore, it is necessary to improve financial education in rural areas, notice the investment willingness of different farmer groups, improve their risk resistance and time tolerance, and thus promote agricultural investments.

Suggested Citation

  • Guihua Liu & Yichao Li & Dingde Xu, 2025. "How does financial literacy affect farmers’ agricultural investments? A study from the perspectives of risk preferences and time preferences," Applied Economics, Taylor & Francis Journals, vol. 57(14), pages 1527-1541, March.
    • Handle: RePEc:taf:applec:v:57:y:2025:i:14:p:1527-1541
    DOI: 10.1080/00036846.2024.2313596
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