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Free keywords:
risk management, off-farm diversification, probit model, cotton farmers
Abstract:
Agriculture is a very risky business and farmers have to deal with various socio-economic and environmental
challenges at farm level. Therefore, farmers have to adopt certain management options to cope with those
different kinds of risks. Therefore, using cross-sectional data of 210 farm households collected from three cotton
districts, this study aims to investigate the effect of perceived risks in farming on farmers’ decision to adopt offfarm
diversification income sources. This study uses correlation analysis and probit regression model to explore
the study objectives. The findings of the study confirms our hypothesis that perception of different kinds of risk
leads farmers to diversify their income sources in order to sustain their livelihood in case of loses from
agriculture. In addition to perceived risks, the study also found positive association of education, farming
experience, risk averse nature of farm household were the other factors that significantly affect the farmers
decision to adopt off-farm diversification income sources.
