Impact of development interventions on individual risk preferences: Evidence from a field-lab experiment and survey data

• Published in: Journal of behavioral and experimental economics Vol. 111; p. 102238
• Main Authors: Pace, Noemi, Daidone, Silvio
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.08.2024
• Subjects: Cash transfers; Community development interventions; Laboratory experiment in the field; Risk preferences; Community development interventions; Laboratory experiment in the field; O12; Cash transfers; Risk preferences; D81; O55; I38
• ISSN: 2214-8043; 2214-8051
• DOI: 10.1016/j.socec.2024.102238

•Combined cash transfers and community development program reduce risk aversion.•Risk preferences weakly mediate programs’ impact on risky investment decisions.•Investment decisions depend mostly on credit and liquidity constraints.•Subjects are less risk-averse under incentivized choices than hypothetical payoffs. In rural settings, individual risk preferences represent one of the channels driving the shift from low-return/low-risk activities towards high-return/high-risk activities. This study takes advantage of data collected for the impact evaluation of the Child Grants Programme, an unconditional cash transfer program, and the Sustainable Poverty Reduction through Income, Nutrition and Access to Government Services (SPRINGS) project, a community development package, in rural Lesotho. The paper has two major goals. First, we investigate the effects of the programs on risk preferences measured via laboratory experiments in the field and a survey instrument. Second, we perform a mediation analysis to quantify the extent to which the programs affect risky investment decisions in real life through changes in risk preferences. Results show that the combination of programs decreases risk aversion, partially mediating the impact of the programs on risky agricultural investment decisions in real life.