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Contrasting income shocks with asset shocks: livestock sales in northern Kenya

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  • John McPeak
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    Abstract

    The literature on risk management in agrarian economies has predominantly focused on the use of assets to buffer consumption against income shocks. However, households in certain low-income, high-risk environments confront asset as well as income shocks. This study investigates livestock sales behavior in an environment where both income and asset shocks occur. The nature of each type of shock is analyzed, and their respective impact on sales behavior is identified. Results indicate income and asset shocks are positively correlated, but influence sales in an offsetting fashion. This provides a possible explanation for the limited empirical support found by previous studies investigating the role of livestock sales in buffering consumption. Marketing and savings institutions that reduce vulnerability to asset shocks in addition to income shocks offer the potential to reduce household risk exposure. Copyright 2004, Oxford University Press.

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    Bibliographic Info

    Article provided by Oxford University Press in its journal Oxford Economic Papers.

    Volume (Year): 56 (2004)
    Issue (Month): 2 (April)
    Pages: 263-284

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    Handle: RePEc:oup:oxecpp:v:56:y:2004:i:2:p:263-284

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    Cited by:
    1. Carter, Michael R. & Lybbert, Travis J., 2012. "Consumption versus asset smoothing: testing the implications of poverty trap theory in Burkina Faso," Journal of Development Economics, Elsevier, Elsevier, vol. 99(2), pages 255-264.
    2. Andersson, Camilla & Mekonnen, Alemu & Stage, Jesper, 2011. "Impacts of the Productive Safety Net Program in Ethiopia on livestock and tree holdings of rural households," Journal of Development Economics, Elsevier, Elsevier, vol. 94(1), pages 119-126, January.
    3. Santos, Paulo & Barrett, Christopher B., 2006. "Informal Insurance in the Presence of Poverty Traps: Evidence from Southern Ethiopia," 2006 Annual Meeting, August 12-18, 2006, Queensland, Australia, International Association of Agricultural Economists 25487, International Association of Agricultural Economists.
    4. Chiu, Leslie J. Verteramo, 2013. "Risk Rationing and Jump Utility," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150589, Agricultural and Applied Economics Association.
    5. Marijke Verpoorten, 2007. "Household Coping in war- and peacetime: cattle sales in Rwanda, 1991-2001," LICOS Discussion Papers, LICOS - Centre for Institutions and Economic Performance, KU Leuven 18907, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    6. DELPIERRE Matthieu & VERHEYDEN Bertrand & WEYNANTS Stéphanie, 2011. "On the interaction between risk-taking and risk-sharing under farm household wealth heterogeneity," CEPS/INSTEAD Working Paper Series, CEPS/INSTEAD 2011-35, CEPS/INSTEAD.
    7. McPeak, John, 2006. "Confronting the risk of asset loss: What role do livestock transfers in northern Kenya play?," Journal of Development Economics, Elsevier, Elsevier, vol. 81(2), pages 415-437, December.
    8. Lybbert, Travis J. & McPeak, John, 2012. "Risk and intertemporal substitution: Livestock portfolios and off-take among Kenyan pastoralists," Journal of Development Economics, Elsevier, Elsevier, vol. 97(2), pages 415-426.
    9. Mude, Andrew G. & Barrett, Christopher B. & McPeak, John G. & Kaitho, Robert & Kristjanson, Patti, 2009. "Empirical forecasting of slow-onset disasters for improved emergency response: An application to Kenya's arid north," Food Policy, Elsevier, Elsevier, vol. 34(4), pages 329-339, August.
    10. Jakobsen, Kristian Thor, 2012. "In the Eye of the Storm—The Welfare Impacts of a Hurricane," World Development, Elsevier, Elsevier, vol. 40(12), pages 2578-2589.
    11. Gabriella Berloffa & Francesca Modena, 2009. "Income Shocks, Coping Strategies, and Consumption Smoothing. An Application to Indonesian Data," Department of Economics Working Papers, Department of Economics, University of Trento, Italia 0901, Department of Economics, University of Trento, Italia.
    12. Barrett, Christopher B., 2008. "Smallholder market participation: Concepts and evidence from eastern and southern Africa," Food Policy, Elsevier, Elsevier, vol. 33(4), pages 299-317, August.
    13. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers, International Food Policy Research Institute (IFPRI) 1127, International Food Policy Research Institute (IFPRI).
    14. Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2007. "Poverty Traps and Natural Disasters in Ethiopia and Honduras," World Development, Elsevier, Elsevier, vol. 35(5), pages 835-856, May.
    15. Ruhangawebare, Godfrey Kalemera, 2010. "Factors Affecting The Level Of Commercialization Among Cattle Keepers In The Pastoral Areas Of Uganda," Research Theses, Collaborative Masters Program in Agricultural and Applied Economics 117797, Collaborative Masters Program in Agricultural and Applied Economics.
    16. Campbell, Bruce M. & Gordon, Iain J. & Luckert, Martin K. & Petheram, Lisa & Vetter, Susanne, 2006. "In search of optimal stocking regimes in semi-arid grazing lands: One size does not fit all," Ecological Economics, Elsevier, Elsevier, vol. 60(1), pages 75-85, November.
    17. Santos, Paulo & Barrett, Christopher B., 2011. "Persistent poverty and informal credit," Journal of Development Economics, Elsevier, Elsevier, vol. 96(2), pages 337-347, November.
    18. John McPeak & Sommarat Chantarat & Andrew Mude, 2010. "Explaining index-based livestock insurance to pastoralists," Agricultural Finance Review, Emerald Group Publishing, Emerald Group Publishing, vol. 70(3), pages 333-352, November.

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