Measuring and factors affecting the risk attitudes of selected farmers in Story County, Iowa

Abstract

Risk attitudes of farmers are very important to the decision-making under risk of farmers. There are many methods to study the risk attitude. This study used the method called the direct application of the utility function. This method involves the derivation of the risk attitude measurement coefficients from the utility functions;This study includes data collection from 41 randomly selected farmers whose farms are located to the north of Iowa State University campus, Ames, Iowa. The selected mathematical form of the utility function was the double log form. This utility function says that the utility is a function of only income. The estimation technique of the utility function is the ordinary least squares method. This study has the hypothesis that selected farmers are all risk averse, and this hypothesis is confirmed by the results of this study;The probability distribution of the estimated risk attitude coefficients are found to be significantly different from the normal distribution. This was done by the chi-square method. Attempts have been made to consider what factors may affect the risk attitude. Three variables; net farm income, years of schooling and the number of dependents, have been successfully tested to be factors affecting the risk attitude. The method of testing is again the ordinary squares method.

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