Attitudes towards Risk of Forest Dependent Communities - Evidence from Andhra Pradesh

This study is an attempt to generate empirical evidence on attitude towards risk of forest dependent communities (FDCs). The FDCs covered in the study include two different geographical regions from the Indian state of Andhra Pradesh – Rayalaseema (a relatively dry forest region with low income) and the coastal region (relatively fertile forest and with higher income). Attitude towards risk was measured as the revealed degree of risk aversion (as a constant relative risk aversion coefficient) from the multiple price list methodology. With these measures, on average, members of FDCs from Rayalaseema were found to be more risk averse as compared to their counterparts from the coastal region. Using interval regression, the study also looked at the role of income and socioeconomic variables on their risk behaviors. For members of FDCs from Rayalaseema, income was not found to be a contributor towards risk aversion. Including socioeconomic variables in the regression showed that on average being men, married and a shared decision-maker within family contributed positively to risk aversion, and membership to managing committee and having adult children in the family negatively so. Degree of risk aversion for members of FDCs in the coastal region, however, did show a role for income, albeit weak statistically. In particular, members from the low and high income groups were found to be risk seeking and those from the middle income groups risk averse, with family size and education contributing positively to risk aversion and proximity to urban centers negatively so.