Risk preference, trust, and willingness-to-accept subsidies for pro-environmental production: an investigation of hog farmers in China

Abstract

The objectives of this study are to investigate Chinese hog farmers’ minimum willingness-to-accept (WTA) subsidies for complying pro-environmental (i.e., safe meat) production, and to explore the factors that affect farmers’ WTA, paying a special attention to the role of risk preference and trust. A double-bounded dichotomous choice (DBDC) approach is used to analyze farmers’ WTA for complying three different hypothetical policy scenarios: the first scenario with delayed and uncertain subsidies, the second scenario with delayed but certain subsidies, and the third scenario with certain and immediate subsidies. Within the DBDC maximum-likelihood estimation framework, we further simultaneously explore how these three scenarios and social-demographic characteristics (e.g., risk preference and trust) affect farmers’ WTA. The data for empirical analysis are collected from 712 hog farmers in Henan and Anhui provinces of China. Our findings indicate that the compromised effectiveness of the current subsidy policy targeting harmless treatment of dead hogs is mainly due to the delayed payment, rather than low subsidy levels. Thus, the policy focus should be given to the pathways that help to simplify the miscellaneous procedures causing the delayed subsidy payments. Our estimates also show that farmers’ trust to the local government affects farmers’ WTA significantly, but their risk preferences do not. In particular, we find that hog farmers with higher trust levels require lower subsidies, suggesting that disseminating the subsidy program via personal networks might be more useful than through government propagandas.

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Notes

  1. 1.

    ¥ is the Chinese currency, and 1$  =  ¥6.70 (2017 data).

  2. 2.

    Harmless disposal of dead hogs refers to having them buried in a disposal pit or incinerated.

  3. 3.

    This assumption may not hold when a farmer is assumed to be risk-averse, which is not a case in the present study.

  4. 4.

    A structural model refers to the sub-model of structural equation modelling which specifies the relationship between the endogenous variables and exogenous variables and the relationships among endogenous variables.

  5. 5.

    For the sake of brevity, the results for the original model in which error terms are assumed to be uncorrelated are not reported but are available upon request.

  6. 6.

    RMSEA: Root mean square error of approximation; NFI: Normed-fit index; CFI: Comparative fit index; GFI: Goodness-of-fit index; AGFI: Adjusted goodness-of-fit index.

  7. 7.

    Despite SCENARIO2 having a smaller percentage of “YY” responses compared to SCENARIO2, the percentage of “YN” responses (34.6%) is much higher than that of SCENARIO1 (16.7%).

  8. 8.

    The shift effect encompasses a battery of potential explanations including yea-saying behavior, strategic behavior, indignation, and cost expectations etc., among other proposed explanations (Alberini et al. 1997; Whiteheads 2002; Watson and Ryan 2007). However, due to data limitation we could not test for these factors individually.

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Acknowledgements

The research is supported by the National Natural Science Foundation of China (Project Approval nos. 71673115 and 71540008).

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Correspondence to Jianjun Tang.

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Wang, J., Yang, C., Ma, W. et al. Risk preference, trust, and willingness-to-accept subsidies for pro-environmental production: an investigation of hog farmers in China. Environ Econ Policy Stud 22, 405–431 (2020). https://doi.org/10.1007/s10018-020-00262-x

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Keywords

  • Willingness-to-accept
  • Subsidies
  • Risk preference
  • Trust
  • Safe meat production
  • China

JEL Classification

  • D81
  • Q51
  • Q18