Farm Size, Environmental Risk and Risk Preferences: The Case of Namibian Commercial Cattle Farming

Utilizing a unique 2008 data set of 399 Namibian commercial cattle farmers, we investigate the interdependencies between environmental risk, risk preferences and farm size. We demonstrate that the Pareto distribution -- which separates the distribution into two parts -- is a statistically plausible description of the empirical overall farm size distribution. A group comparison based on the two parts of the Pareto distribution yields that farms in the upper part of the distribution have a significantly lower environmental risk than farms in the lower part while there are no significant differences in degree of risk aversion. Furthermore, we find that a more risk-loving attitude implies a more unequal size distribution among farmers of the same risk preference group, and a longer tail.