How temperature changes affect risk attitudes: Evidence from 1,708 farming households in China

Due to the long-term trend of climate change, farmers-who are the key decision-makers in agricultural production-are likely to adjust their risk attitudes in response to climate change shocks. Our research focuses on how farmers, as the smallest decision-making agents in agriculture, respond to these changes. This study analyzes the 2018 China Family Panel Studies data using a temperature anomalies approach and a fixed-effects model to investigate how climate change affects farmers' risk attitudes. The research reveals a significant correlation between the magnitude of temperature fluctuations experienced by farmers and their tendency toward risk-taking. Specifically, the more drastic the temperature changes farmers experience between birth and interview, the higher their tendency toward risk aversion. Age plays an essential role in shaping changes in risk attitudes, whereas gender does not appear to have a notable effect. The findings of this study provide a theoretical foundation for developing policies and insurance programs, offering recommendations based on the observed shifts in risk attitudes.