Publication Details

AFRICAN RESEARCH NEXUS

SHINING A SPOTLIGHT ON AFRICAN RESEARCH

agricultural and biological sciences

Poverty, risk aversion, and path dependence in low-income countries: Experimental evidence from Ethiopia

American Journal of Agricultural Economics, Volume 91, No. 4, Year 2009

In most low-income countries, rural households depend on mixed rain-fed agriculture/livestock production, which is very risky. Due to numerous market failures, there are few ways to shift risks to third parties. The literature has focused on what determines the responses of households in such environments. Of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps. This paper estimates levels and determinants of risk aversion in the highlands of Ethiopia. We find high risk aversion and evidence that constraints have important impacts on risk-averting behavior with perhaps significant implications for long-term poverty. The results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps. © 2009 Agricultural and Applied Economics Association.

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Citations: 367
Authors: 2
Affiliations: 2
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Study Locations
Ethiopia