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Risk attitude and discount rate: crucial factors for planting oil palms by smallholders?

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  • Sarwosri, Arieska

Abstract

Even though oil palm is not a native cash crop in Indonesia, the cultivation of oil palm is rapidly developed by smallholder farmers. This study examines if the adoption of oil palm is reasoned in underlying economic preferences. We utilized an incentivized field experiment to elicit smallholders’ risk attitude and discount rate and estimated both preferences jointly. The field experiments included 636 smallholders from Sumatra Island, Indonesia. We compared the risk attitude and discount rate of the oil palm adopters to non-adopters, i.e., rubber smallholders which is the main alternative cash crop of oil palm. We found that adopters are more risk-averse compared to non-adopters. Furthermore, the finding also confirms that risk-averse farmers diversify cultivated crops to mitigate income risks from agriculture. However, we do not find statistically significant differences in the discount rates between the two groups.

Suggested Citation

  • Sarwosri, Arieska, 2019. "Risk attitude and discount rate: crucial factors for planting oil palms by smallholders?," 2019 Conference (63rd), February 12-15, 2019, Melbourne, Australia 285091, Australian Agricultural and Resource Economics Society (AARES).
    • Handle: RePEc:ags:aare19:285091
    DOI: 10.22004/ag.econ.285091
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    Keywords

    Risk and Uncertainty;

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