University of Twente Student Theses


Risk attitude of Livestock Farmers - Explaining farmer’s willingness to take risk

Wissink, Stef (2013) Risk attitude of Livestock Farmers - Explaining farmer’s willingness to take risk.

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Abstract:This thesis investigates farmer’s visions about risk: what do they identify as potential risks and what influences farmer’s willingness to take risk? Quite some time has been spent by several authors to understand willingness to take risk (risk attitude) and how it is influenced. As entrepreneurship is almost a synonym for taking risk, several authors investigated the risk attitude of entrepreneurs and the influence of socio economic characteristics on this risk attitude. It was often suggested that several individual characteristics as age or education, and several business characteristics as for instance solvency or income, determine whether an entrepreneur likes to take risk. Entrepreneurs in livestock farming are confronted with some specific circumstances that increase the risks they face. Some authors focused on the risk attitude of (livestock)farmers. What are the risks farmers are worried about and how are farmers risk attitudes influenced by farms circumstances? This information helps us to better understand farmers and the choices they make. Recent research is however not available and farming circumstances changed fast recent years. This change probably has influenced farmer’s ideas about risk. Out of a literature review and discussions within the Food & Agri department of the Rabobank Centraal Twente a new research model was created to test the influence of socio economic characteristics on livestock farmers risk attitude. A survey was held amongst 335 livestock farmers in which respondents were asked to 1) make clear which risks they experienced as threatening 2) indicate their willingness to take risk and 3) their socio economic characteristics. Descriptive statistics made clear which risks farmers identified as most threatening. Correlation and regression analyses were done to identify relations between farmer’s socio economic characteristics and farmers risk attitude. What farmers identify as risk looks to have changed. Farmers in this survey mentioned other risks as most threatening to their business than farmers in surveys about a decade ago. High input prices were mentioned most often as a possible threat to the business. This differs from the results of existing research on Dutch livestock farmers, in which epidemic diseases were identified as most severe risk. Despite the changes in farming circumstances the results about explaining risk attitude were in line with the conclusions of existing literature. Some socio economic characteristics are related to farmers risk attitude. Higher educated farmers, farmers with a successor, larger farms and farms with higher total income seem to be more willing to take risk. However, the regression models that have been tested explain only about 20 - 30% of the variation in risk attitude. This implies that other factors explain móre of the variation in farmers risk attitude. As noted in former studies it is suggested again that a large part of farmer’s risk attitude is explained by personal motivations, characteristics or experiences
Item Type:Essay (Master)
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
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