The role of trust and risk preferences in the investment decision of farmers : evidence from surveys and field experiments in rural China

In rural China, forest and agricultural lands are undergoing major reforms, leading to many new challenges. I chose to understand the factors affecting a farmer’s investment decision on their lands. The first manuscript focuses on the role of property rights, social capital and contractual rules in the design and implementation of the world’s first Clean Development Mechanism (CDM) afforestation project in China. Using village-level surveys, I found: [1] although the project facilitates participation through carbon pooling and a share-holding system, much of the project land remained unforested; [2] the primary reasons for the unforested lands included constrained contractual rules, property rights allocation disputes, and low levels of social capital in some villages. The second manuscript identifies determining factors of villagers’ trust in their peer members. I used a unique data set collected by household surveys and trust games con-ducted in 30 administrative villages in Yunnan Province of southwestern China. I found: [1] the survey measure and experimental measure of trust were strongly correlated; [2] evidence that the positive individual social interactions and positive past experiences had a significant and positive effect on the villagers’ mutual trust; [3] that while formal village institutions might have gradually substituted for the traditional informal institutions, the formal institutions has not effectively replaces the roles of informal village institutions in maintaining villagers’ mutual trust; [4] openness to the outside world and the market could have eroded mutual trust among rural villagers in Yunnan Province. In the third manuscript, I used a data set collected through artefactual field experiments and household surveys from 30 villages in Yunnan Province. I linked the experimental measure of risk preference to household investment decisions on input use on farmlands. Major findings in this chapter include: [1] farmland size was negatively and significantly correlated with the intensity of both chemical fertilizer and pesticide use; [2] a family head’s risk aversion level was significantly and positively correlated with intensity of both chemical fertilizer use and pesticide use; [3] a family’s connection to social networks negatively and significantly predicts its decision regarding the intensity of pesticide use.Forestry, Faculty ofGraduat