Risk preferences of agricultural students and their willingness to become a farmer

Abstract: This study investigates the link between risk preferences of agricultural students and their willingness to become a farmer. I measure willingness to become a farmer and risk preferences in an online survey and incentivized experiment conducted with 577 students at Bogor Agricultural University, Indonesia. Discriminating between alternative theories of decision-making under risk, I find that students’ risk preferences behave in accordance with Cumulative Prospect Theory (CPT), whereas there is no connection between risk preferences and students’ willingness to become a farmer. Framing the risky gamble tasks in either an agricultural or a general entrepreneurship context does not help in improving the predictive power of the tasks. Based on a large sample with high statistical power, these results contribute to the debates on risk preferences in agriculture as well as methodological studies on the external validity of behavioral field experiments. I also discuss the impact of socio-economic background variables as they relate to generation renewal and the so-called “young farmer problem” in agriculture.