REECAP 7th Annual Meeting

Linking risk preferences and land use right perceptions: Experimental evidence using a Prospect Theory approach

Not scheduled

20m

German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig

Applications of experimental methods to agricultural and agri-environmental themes Session Block

Speaker

Zafar Kurbanov (IAMO (Leibniz Institute))

Description

Motivation
Land tenure security is important for agricultural resilience, investment, and productivity, but in many countries, farmers often lack formal documentation and enforcement. While previous studies have explored institutional and economic determinants of land tenure security, little is known about the behavioral factors that can explain these perceptions. This study estimates the relationship between farm managers’ risk preferences and their perceptions of tenure security.

Methods
Using lab-in-the-field experiment data from 307 farm managers in Samarkand, Uzbekistan, in 2024, we examine how risk aversion, loss aversion, and probability distortion relate to perceptions of tenure security, decision-making autonomy in crop choice, marketing, and land sub-rents.
Participants for the experiments were selected randomly from the farm lists in three districts of Samarkand region. Prior to this, we selected three districts depending on the specialization in strategic crops, and more diversified crops. To elicit the parameters of the Prospect Theory utility function, we employed the experimental design of Tanaka et al. (2010) that provides a direct link between participants’ choices in lottery games and values for risk aversion, loss aversion, and probability distortion. The experiments were followed by survey module on perceptions of land use rights and tenure security.
Uzbekistan presents a compelling case for studying this relationship due to institutional reforms. Until 2020, its agricultural sector was guided by production quotas for strategic crops such as cotton and wheat, centralized resource allocation, and frequent farmland redistributions.

Results and lessons learned
Our findings indicate risk aversion primarily affects perceptions of autonomy in crop choice, with less risk-averse farmers perceiving higher likelihood of disagreement and lower likelihood of agreement with autonomy of crop choice. Loss aversion, by contrast, is important in perceived autonomy of crop choice and land-use permissions, with loss-averse managers consistently perceiving higher likelihood of disagreement and lower likelihood of agreement with autonomy of crop choice and land-use permissions. Probability distortion, which in our case may stand for a behavioral bias that puts higher weights on rare but adverse institutional interventions like land redistributions, amplifies perceptions of land use rights, while exacerbating concerns about tenure security. The results also show that institutional factors also matter for perceptions of land rights.
The findings have implications for the design of agri-environmental policies in Uzbekistan, where for example farmers’ participation in agroforestry and land reclamation initiatives were very low, driven both by institutional constraints such as security of property rights and risk concerns.