Relating risk preferences and risk perceptions over different agricultural risk domains: Insights from Ethiopia

Households in developing countries are exposed to various shocks and risks, which leaves them vulnerable as they typically have limited resources cope with them. Even though a large body of development literature has focused on the role risk rural livelihoods, focus is often single sources taking unidimensional view preference. This paper explores diversity perception preferences Ethiopian households by combining incentivized field experiments detailed primary household survey data. We disentangle relationship between using an innovative combination time framing instrumental variable estimation approaches. find that our respondents multiple past perceive future threats across different agricultural domains. Our can be characterized relatively risk-averse loss-averse, also overweight unlikely extreme outcomes. statistically significant association prospect theory parameters—risk aversion, loss probability weighting—and overall perception, domain-specific perceptions (except for personal domain) impact dimension risk. findings make important contribution understanding farm households’ behavior, guide prioritizing efforts stimulate better informed well-targeted management policy interventions.