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Assessing risk attitudes and time preferences on the rural–urban interface of Bengaluru, India

Johannes Wegmann (Department of Agricultural Economics and Rural Development, Georg-August-Universitat Göttingen, Göttingen, Germany)
Daniel Hermann (Department of Agricultural Economics and Rural Development, Georg-August-Universitat Göttingen, Göttingen, Germany)
Oliver Musshoff (Department of Agricultural Economics and Rural Development, Georg-August-Universitat Göttingen, Göttingen, Germany)

Agricultural Finance Review

ISSN: 0002-1466

Article publication date: 25 October 2021

Issue publication date: 3 October 2022

82

Abstract

Purpose

Urbanization is a main driver of the transformation from agricultural-based economies to service-based economies. At the same time, urbanization might also alter preferences and attitudes such as risk and time preferences that contribute to economic growth and foster this transition. To study the effect of urbanization, few studies have compared individual time or risk preferences in rural and urban settings, reporting mixed results. This study analyses how risk and time preferences alter along the rural–urban interface and assesses the correlation of socio-economic, socio-cultural and demographic characteristics with these preferences. Using such an approach provides insights how preferences are altered in areas of transition as the rural–urban interface mirrors different stages of urbanization.

Design/methodology/approach

Using experimental approaches, risk attitudes and time preferences of 1,117 agricultural and non-agricultural households were elicited along the rural–urban interface of the fast-developing Indian megacity Bengaluru in 2016/17. The study reports joint estimations of risk and time preferences and discusses the influence of urbanization on these preferences.

Findings

Results show that households are on average slightly risk-averse and highly impatient. The results also indicate a decline in discount rates towards rural areas while risk preferences do not considerably differ between those areas. This puzzling result may be explained by difference response of rural and urban areas to the Demonetization policy of the Indian government in 2016.

Originality/value

The research design compares jointly estimated risk and time preferences of agricultural and non-agricultural households of a rapidly urbanizing area in a low-medium income country.

Keywords

Acknowledgements

The authors gratefully acknowledge the financial support provided by the German Research Foundation, DFG, through grant number MU 1825/19-1 as part(s) of the Research Unit FOR2432/1. The authors would also like to thank two anonymous reviewers for their helpful comments and suggestions.

Citation

Wegmann, J., Hermann, D. and Musshoff, O. (2022), "Assessing risk attitudes and time preferences on the rural–urban interface of Bengaluru, India", Agricultural Finance Review, Vol. 82 No. 5, pp. 828-846. https://doi.org/10.1108/AFR-04-2021-0040

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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