Speaker
Description
Farmers’ expectations regarding the future of their farm business play an important role in investment decisions, succession planning, and long-term farm sustainability. Understanding the association of behavioral factors like risk and time preferences with these expectations can contribute to designing agri-environmental policies. While these behavioral dimensions have been extensively studied, little is known from transitional context of former planned economies where new farming community was introduced three decades ago following the collapse of collective farms.
To address this gap this study examines the relationship between farmers’ risk and time preferences and their expectations regarding investment decisions, intergenerational succession, and business continuity in two distinct irrigated settings of post-Soviet Central Asia. Using lab-in-the-field experiments with 713 farmers in Jalal-Abad region of Kyrgyzstan and Samarkand region of Uzbekistan conducted in October-December 2024, we elicited risk and time preferences through lottery-based tasks of Tanaka et al. (2010). The experiments were followed by survey module. We assigned risk and time preference parameters to each individual farmer by using cumulative prospect theory and quasi-hyperbolic discounting.
The results suggest that more risk-averse farmers are more likely to expect farm succession, suggesting that they perceive farming as a stable livelihood for future generations. At the same time, lower risk aversion is associated with higher investment likelihood, which may indicate that more risk-taking farmers are likely to make significant farm investment. Loss aversion is not significantly associated with investment, planned farming horizon, or succession expectations, implying that perceived risk plays a stronger role in farmers’ decisions than the fear of financial losses. Farmers who discount future rewards more heavily expect to exit farming significantly earlier, reinforcing that short-term-oriented farmers struggle with long-term sustainability. While time discounting negatively influences long-term farming expectations, present bias has a positive effect on succession expectations, indicating that farmers with a stronger future orientation are more likely to expect their children or relatives to continue the farm, and rely on intergenerational transfer. Probability distortion does not significantly relate to any of the dependent variables, indicating that farmers’ business expectations are primarily shaped by their risk and time preferences rather than distortions in probability perception.
The results emphasize the need for behaviorally informed policy interventions to support farmers’ long-term decisions. Policies that mitigate perceived risk like insurance schemes or guaranteed investment returns may encourage long-term planning. Additionally, financial instruments tailored to farmers with high discount rates could help shift short-term-focused decision-making towards sustainable agricultural strategies.
| Keywords | cumulative prospect theory, quasi-hyperbolic discounting, farm investment, intergenerational succession, Central Asia |
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| Status of your work | First results |
| Early Career Researcher Award | No, the paper is not eligible |
