Speaker
Description
Most studies on risk and time preferences focus on how individuals’, preferences change ex-post, following a traumatic or dramatic event such as civil war, conflict, or natural disasters. Extensive research has demonstrated that such catastrophic shocks significantly alter risk preferences. Another strand of literature explains how prolonged exposure to risks explains the heterogeneity in preferences and thus focuses on external shocks outside the institutional and policy framework. While these studies provide valuable insights into the ex-post effects of extreme shocks or exposure to prolonged risks on preferences, an important yet underexplored question remains whether institutional framework shapes farmers’ preferences.
Our study addresses this gap by examining how farmers’ preferences related to institutional setting within a single country. Unlike cross-country comparisons, our approach controls for economic, social, and environmental factors, isolating the effects of institutional frameworks. We focus on Uzbekistan, where farmers operate under two distinct agricultural systems. Cotton farmers operate under a highly centralized system, where the government mandates crop choices and controls marketing channels. In contrast, horticultural farmers enjoy greater decision-making autonomy. Using lab-in-the-field experiments with 307 farm managers in Samarkand region of Uzbekistan conducted in November-December 2024, we elicited risk and time preferences through lottery-based tasks of Tanaka et al. (2010). The experiments were followed by survey module. Risk and time preferences were measured using cumulative prospect theory and quasi-hyperbolic discounting.
Results show that higher specialization in cotton significantly reduces both risk and loss aversion. Cotton farmers, operating in the state-controlled system with guaranteed markets and prices, are less sensitive to risks and losses. Their reduced exposure to market-driven uncertainties makes them more tolerant. Over time, top-down institutional predictability appears to desensitize them to losses, as setbacks are perceived as systemic rather than consequences of their own choices. Furthermore, discount rates increase with greater cotton specialization, indicating lower patience and a stronger focus on short-term returns. This can be attributed to financial constraints in cotton farming, where delayed government payments create cash flow uncertainties, incentivizing farmers to prioritize immediate income. The rigidity of cotton farming also limits flexibility, reinforcing a short-term economic mindset. Overall, Uzbekistan’s institutional framework governing cotton production reduces risk and loss aversion while increasing impatience, fostering a preference for monoculture over diversified farming. These findings have important implications for biodiversity on agricultural landscapes, highlighting the behavioral effects of institutional constraints and the need for policies that incentivize diversification.
| Keywords | Risk preferences; Time preferences; Institutional framework; Monoculture; Agricultural policy |
|---|---|
| Status of your work | First results |
| Early Career Researcher Award | Yes, the paper is eligible |
