Journal of Integrative Agriculture ›› 2024, Vol. 23 ›› Issue (12): 4250-4262.DOI: 10.1016/j.jia.2024.10.004

所属专题： 农业经济与管理Agricultural Economics and Management

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  • 收稿日期:2023-02-23 接受日期:2024-03-25 出版日期:2024-12-20 发布日期:2024-11-18

Factors affecting farmers’ choice to adopt risk management strategies: The application of multivariate and multinomial probit models

Jamal Shah1#, Majed Alharthi2    

  1. 1 School of Business, Department of Economics, University of Dundee, Dundee DD1 4HN, United Kingdom

    2 Finance Department, College of Business, King Abdulaziz University, Rabigh 21911, Saudi Arabia

  • Received:2023-02-23 Accepted:2024-03-25 Online:2024-12-20 Published:2024-11-18
  • About author:#Correspondence Jamal Shah, E-mail: jamalshah@awkum.edu.pk
  • Supported by:

    The authors would like to thank the Editor-in-Chief and anonymous reviewers for their valuable recommendations and comments that have improved the manuscript significantly. 

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Abstract:

This study investigates the factors that impact farmers’ adoption of risk management strategies (RMS) in Pakistan during times of uncertainty.  The study examines farmers’ adoption of RMS using both multinomial probit (MNP) and multivariate probit (MVP).  Data were collected from 382 farmers sampled from four districts in Khyber-Pakhtunkhwa (KP) province of Pakistan via a multistage sampling technique.  This study utilizes the MNP model, considering the assumption of Independence of Irrelevant Alternatives (IIA) and incorporating correlated error terms.  The objective is to understand farmers’ behavior in risky situations and determine if there is heterogeneity.  Results are compared with the MVP model to assess robustness and gain deeper understanding of farmers’ decision-making processes.  The research findings reveal that our results are robust, and farmers behave homogeneously in various RMS scenarios.  Farmers adopt RMS individually or in combination to mitigate the adverse effects of natural calamities on their livelihood.  The risk-averse farmers, who perceive weather-related risks as a threat, access credits and information, and have farms close to a river are more likely to adopt RMS, irrespective of the format of the strategies available.  Moreover, the predicted probabilities and correlation of the RMS and RM categories have strengthened our model estimation.  These findings provide insights into the behavior of farmers in adopting RMS which are helpful for policymakers and stakeholders in developing strategies to mitigate the impacts of natural calamities on farmers.


Key words: multinomial probit model , multivariate probit model ,  risk management strategies ,  risk-attitude ,  risk perception