Risk Attitudes of Subsistence Farmers in Northeast Brazil: A Sampling Approach

The risk attitudes of samples of small farm owners and sharecroppers in Brazil were investigated. Data were derived by posing two sets of simple, realistic mind experiments involving choice between risky and sure alternatives. In the first set, the farmer's total income was uncertain but his subsistence need was assured; in the second set, his subsistence needs also were at risk. Comparison of the distributions of the estimated risk attitude coefficients for the two tenure groups and for the cases of subsistence assured and subsistence at risk implies that owners and sharecroppers may react differently to risk, and that poor peasants may react differently within an expected utility context depending on whether or not there is uncertainty about the satisfaction of their subsistence needs. Most peasants were found to be risk adversive; risk aversion tends to be more common among small owners than among sharecroppers. Level of income and other socioeconomic factors influence peasants' attitudes toward risk. It is concluded that it is possible via a simple questionning technique to elicit meaningful information on peasant attitudes that are pertinent to rural development.