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such that losses are reduced during unfavorable years (Pandey et al 1998). Ex antestrategies can be broadly grouped into two categories: those that reduce risk by diversificationand those that do so by maintaining flexibility. Spatial diversification offarms, diversification of agricultural enterprises, diversification of crops and varieties,and diversification of income among farm and nonfarm activities are some examples(Siddiq and Kundu 1993, Singh et al 1995). Similarly, maintaining flexibilityis an adaptive strategy that allows farmers to switch resources among activities asrequired to reduce risk.Loss management or ex post strategies are designed to prevent a shortfall inconsumption when the family income drops below what is necessary for maintainingconsumption at its normal level. These include seasonal migration, consumption loans,and asset liquidation (Jodha 1978). However, these strategies are often inadequate toprevent a reduction in consumption (Pandey et al 2000).The objective in this chapter is to characterize the nature and magnitude of riskin rainfed rice areas of eastern Uttar Pradesh, India. Farmers’ ex ante risk-copingstrategies and the extent to which risk and risk aversion may be constraints to technologyadoption are also analyzed.Methodology and dataThe study of risk and risk management strategies requires temporal data as it is theuncertainty in production and income over time that is of concern to individual farmers.Such data also permit an assessment of the dynamic nature of risk and adjustmentsthat farm households undertake in response to risk. Accordingly, the study isbased on panel data collected from two villages in eastern Uttar Pradesh for the period1994-98. Ninety respondent farmers were randomly selected, 45 farmers fromeach village, and detailed data on rice production practices and other farm and nonfarmactivities of farm households were collected using the interview method. Productiondata were collected at the plot level.The two villages were selected to provide a contrast in production systems. Thevillage Mungeshpur has better access to irrigation, has more lowland fields, and theadoption of modern varieties is greater. In contrast, Itgaon has a poorer irrigationinfrastructure, has a relatively higher proportion of upland fields that are more easilydrained, and the adoption of modern varieties is lower (Table 1). Thus, Mungeshpurprovides a “benchmark” against which the production strategies of farmers in themore risk-prone Itgaon could be assessed. A comparison of rice production practicesin these two villages provided the basis for assessing farmers’ responses to differentialrisks.Our analytical method consisted of computing the variability of rice yield, inputuse, and income at both the plot and farm level. Data were analyzed by poolingthe cross-sectional data with temporal data. To remove farmer-specific effects in plotleveldata, a fixed-effects model was specified using farmer-specific dummy variables.The estimating equation was of the form324 Singh et al