Income Uncertainty, Risk Coping Mechanism and Farmer Production & Management Decision: An Empirical Study from Sichuan Province

With an absence ex-post income risk coping mechanisms such as risk pooling in social networks and inter-temporal consumption smoothing mechanism, Chinese farmers depend heavily on ex-ante mechanisms to cope with income risk. Based on survey data collected on 1063 peasant households in Sichuan province, this paper tests how ex-ante risk coping mechanisms affect farmers’ behavior and welfare. The result indicates that: the conservative production strategy and the diversified strategy play the most important role in farmers’ reducing income fluctuations; but it causes the low efficiency and widens the income gap between the poor and the rich.