One of the major problems in developing countries – which often leads to widespread hunger and poverty – is unproductive agriculture. According to many economists, an explanation of why many farmers in these countries are doing badly is their unwillingness to take economic risks. However, a research team led by the University of Copenhagen has now identified another possible problem: many farmers rely on religion to structure their agricultural and economic decisions.
“The general explanation that poverty is associated with risk aversion – i.e. an unwillingness to use new technology or try out new crops should be re-assessed in relation to structural and contextual factors,” said study lead author Goytom Abraha Kahsay, an assistant professor of Food and Resource Economics at the University of Copenhagen. “Both our data and other recent studies show that people in developing countries are generally willing to take risks. But now we are able to explain it through religiosity.”
To map Ethiopian farmers’ risk preferences, the scientists designed a lottery experiment in which 819 small-scale, subsistence farmers were asked to choose between economic decisions either with a certain or uncertain outcome in several situations. Before the experiment, the researchers had assessed the religiosity of the individual farmers based on a number of criteria, such as the extent to which they believed that God intervenes in their lives, or how much money they donate to their church or mosque. The analysis revealed that about 26 percent of the farmers believed that God decides everything and intervenes in their success as farmers, and that their willingness to take risks was higher the more religious they were.
“Many of the surveyees choose to take risks because they believe that their success is entirely in the hands of God anyway. Even though the majority of the population do not share this belief, it equates to millions of Ethiopians sharing this conviction,” Professor Kahsay explained.
“Given ours and other studies’ findings suggesting that religiosity affects economic preferences and socio-economics outcomes, the authorities and policy makers may consider working with the Church and other religious institutions, which could probably make a difference in terms of technology adoption, climate adaptation, etc. Most people trust the Church, so any messages conveyed to them in church can probably affect their way of thinking,” he concluded.
The study is published in the journal Agricultural Economics.