Agricultural Risk and Remittances: The Case of Uganda

The economic literature showed that remittances could replace missing credit and insurance markets. As a result, it is natural to expect that higher amounts of remittances will motivate agricultural farmers to engage in riskier activities. The present study aims to verify the latter hypothesis by answering two distinct questions: do households that receive higher remittances choose to cultivate a riskier crop portfolio; do households that receive higher remittances choose to engage either in crop specialization or in crop diversification? I use the Living Standards Measurement Study-Integrated Surveys on Agriculture (LSMS-ISA) dataset on Uganda established by the World Bank to test these hypotheses. The results show that remittances have no significant impact on farmers ’ risk decisions in terms of crop portfolio and crop diversification. There is some evidence that credit constrained households that receive remittances engage in crop specialisation, which can be interpreted as a wealth effect