This project explores whether the adoption of new farming practices is decreasing in ambiguity aversion, while conversely, the uptake of insurance is increasing in ambiguity aversion. Such a result will strengthen the argument in favour of mechanisms of risk diffusion, such as insurance products for small-scale farmers.
The experimental literature has largely focused on risk aversion as a determinant in the adoption of new farming practices. However, given the uncertainty surrounding the yield outcomes of new farming practices relative to traditional ones, ambiguity aversion is also likely to be a factor. In this context, we elicit the ambiguity attitudes of small-scale and subsistence urban farmers in Cape Town, South Africa. Using a framed field experiment, we then correlate farmers’ revealed ambiguity attitudes with the uptake of new farming practices, credit and insurance. Specifically, we examine whether the adoption of new farming practices is decreasing in ambiguity aversion, while conversely, the uptake of insurance is increasing in ambiguity aversion. Such a result will strengthen the argument in favour of mechanisms of risk diffusion, such as insurance products for small-scale farmers.
