Experimental Measure of Rural Household Risk Preference: The Case of the SLCP Area in Northern Shaanxi, China

Abstract

This study elicits the risk preferences of rural households through a field experiment conducted in Shaanxi Province using the Holt-Laury mechanism that considers the effects of implementing the Sloping Land Conversion Program (SLCP) on the risk preferences of farmers. The program has significantly changed the structure of farmers’ productive property, which may further influence their risk attitudes. This study reveals that household geographic and demographic characteristics have a significant effect on the risk preferences of participants in the experiment. More importantly, the SLCP has had a significant effect on farmers’ risk preferences. Hence, when assessing the outcome of such public policies as the SLCP that may affect the future incomes of farmers, we should consider the socioeconomic characteristics of the households concerned and the public policies implemented in the targeted area in detail.