Alice Palmantier, Margot Lörcher, Michael Kirk:
The Level of Social Cohesion and Risk Aversion among Cotton Farming Households: Economic Experiments in North Benin

ALICE PALMANTIER, MARGOT LÖRCHER, MICHAEL KIRK
Philipps-Universität Marburg, Institute for Co-operation in Developing Countries, Germany

Cotton production is the main source of income and foreign exchange in Benin. The crop has a long tradition and since 1995 a growing minority of farmers also produces biological certified cotton. Cotton production is one activity of a production system involving the production of cereals, vegetables and other activities.

This study explores the role played by social cohesion and risk attitudes as important determinants for small scale farmers' decision making both theoretically and empirically. Yield, price, and income risks that farmers face in adjusting their cropping patterns arise due to several biophysical factors (e.g. irregular rainfalls, diseases or pest infestations), introduction of new technologies or changing economic environment, and the absence of institutional innovations (e.g. crop insurance, disaster payments, emergency loans). Networks and groups are extremely important for cotton growers in Benin. Cotton farmers belong to village groups of cotton producers giving them access to input and credit as well as to more intensive and regular extension services. Groups result in a cotton community which makes possible for farmers to share risk.

Two producer groups were considered: conventional and organic cotton growing households. First a trust game was conducted to shed light on the level of social capital in both groups of cotton producers. The argument of a special social cohesion that is raised in connection with structure and organisation of the organic farming could not be confirmed. It was shown that the degree of trust between the producers of both farming systems do not differ significantly. In a second step, an experimental gambling approach was applied to identify risk attitudes using experimental procedures with real payoffs. Farmers of both groups were found to be severely risk averse. Differences in the level of trust and risk aversion could rather be attributed to the gender structure of the two different cultivation methods. The strong trust and risk scheme differences between men and women have to be considered in economic assessment to generate useful predictions of innovation adoption or policy measurements.

Keywords: Benin, field experiments, risk aversion, trust game

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Contact Address: Alice Palmantier, Philipps-Universität Marburg, Institute for Co-operation in Developing CountriesMarburg, Germany, e-mail: palmantierwiwi.uni-marburg.de