IDEAS home Printed from https://ideas.repec.org/a/pal/eurjdr/v31y2019i3d10.1057_s41287-018-0168-x.html
   My bibliography  Save this article

Disentangling Poor Smallholder Farmers’ Risk Preferences and Time Horizons: Evidence from a Field Experiment in Ethiopia

Author

Listed:
  • Molla Alemayehu

    (Radboud University Nijmegen)

  • Joost Beuving

    (Radboud University Nijmegen)

  • Ruerd Ruben

    (Wageningen University and Research)

Abstract

This paper considers the economic behaviour of smallholder farmers in eastern Ethiopia and its effects on their poverty status, looking specifically at how farmers deal with production risk and various time horizons. Earlier studies in rural Africa suggested that these are interlinked but that remains analytically unsatisfactory. Through experiments, we seek to disentangle risk preferences and time horizons regarding their impact on poverty. We find that the studied farmers are highly risk-averse and time-impatient; few farmers make longer-term investments. This appears to be covariant with wealth and household indicators, with poorer, less-educated farmers with smaller landholdings making less risky investments, thus yielding smaller returns, which shorten their time horizons. This finding is relevant for rural development policies, in particular suggesting how untying the Gordian knot of risk and time that reproduces rural poverty depends on the simultaneous operation of market and state forces.

Suggested Citation

  • Molla Alemayehu & Joost Beuving & Ruerd Ruben, 2019. "Disentangling Poor Smallholder Farmers’ Risk Preferences and Time Horizons: Evidence from a Field Experiment in Ethiopia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(3), pages 558-580, July.
    • Handle: RePEc:pal:eurjdr:v:31:y:2019:i:3:d:10.1057_s41287-018-0168-x
    DOI: 10.1057/s41287-018-0168-x
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1057/s41287-018-0168-x
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1057/s41287-018-0168-x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Hans P. Binswanger, 1980. "Attitudes Toward Risk: Experimental Measurement in Rural India," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 62(3), pages 395-407.
    2. Gary S. Becker & Casey B. Mulligan, 1997. "The Endogenous Determination of Time Preference," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 729-758.
    3. Fafchamps, Marcel, 2010. "Vulnerability, risk management and agricultural development," African Journal of Agricultural and Resource Economics, African Association of Agricultural Economists, vol. 5(1), pages 1-18, September.
    4. Quang Nguyen, 2011. "Does nurture matter: Theory and experimental investigation on the effect of working environment on risk and time preferences," Journal of Risk and Uncertainty, Springer, vol. 43(3), pages 245-270, December.
    5. Yesuf, Mahmud & Bluffstone, Randall, 2008. "Wealth and Time Preference in Rural Ethiopia," RFF Working Paper Series dp-08-16-efd, Resources for the Future.
    6. Elaine M. Liu, 2013. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1386-1403, October.
    7. Yonas Alem & Mintewab Bezabih & Menale Kassie & Precious Zikhali, 2010. "Does fertilizer use respond to rainfall variability? Panel data evidence from Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 41(2), pages 165-175, March.
    8. Tomomi Tanaka & Colin F. Camerer & Quang Nguyen, 2010. "Risk and Time Preferences: Linking Experimental and Household Survey Data from Vietnam," American Economic Review, American Economic Association, vol. 100(1), pages 557-571, March.
    9. Mette Wik & Tewodros Aragie Kebede & Olvar Bergland & Stein Holden, 2004. "On the measurement of risk aversion from experimental data," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2443-2451.
    10. Mahmud Yesuf & Randall A. Bluffstone, 2009. "Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1022-1037.
    11. Pennings, Joost M.E. & Garcia, Philip, 2005. "The poverty challenge: How individual decision-making behavior influences poverty," Economics Letters, Elsevier, vol. 88(1), pages 115-119, July.
    12. Pender, John L., 1996. "Discount rates and credit markets: Theory and evidence from rural india," Journal of Development Economics, Elsevier, vol. 50(2), pages 257-296, August.
    13. Quang Nguyen & Colin Camerer & Tomomi Tanaka, 2010. "Risk and Time Preferences Linking Experimental and Household Data from Vietnam," Post-Print halshs-00547090, HAL.
    14. Elaine Meichen Liu, 2008. "Time to Change What to Sow: Risk Preferences and Technology Adoption Decisions of Cotton Farmers in China," Working Papers 1064, Princeton University, Department of Economics, Industrial Relations Section..
    15. Holden, Stein T. & Shiferaw, Bekele & Wik, Mette, 1998. "Poverty, market imperfections and time preferences: of relevance for environmental policy?," Environment and Development Economics, Cambridge University Press, vol. 3(1), pages 105-130, February.
    16. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    17. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
    18. Olson, Mancur & Bailey, Martin J, 1981. "Positive Time Preference," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 1-25, February.
    19. Sabine Liebenehm & Hermann Waibel, 2014. "Simultaneous Estimation of Risk and Time Preferences among Small-scale Cattle Farmers in West Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1420-1438.
    20. Chavas, Jean-Paul, 2004. "Risk Analysis in Theory and Practice," Elsevier Monographs, Elsevier, edition 1, number 9780121706210.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cynthia Nneka Olumba & Guy Garrod & Francisco Jose Areal, 2024. "Time Preferences, Land Tenure Security, and the Adoption of Sustainable Land Management Practices in Southeast Nigeria," Sustainability, MDPI, vol. 16(5), pages 1-22, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Lily, Miriam Al & Liebenehm, Sabine & Waibel, Hermann, 2021. "Risk and Time Preferences of Poor Urban Households in Saudi Arabia," 2021 Conference, August 17-31, 2021, Virtual 315152, International Association of Agricultural Economists.
    2. Omotuyole Isiaka Ambali & Francisco Jose Areal & Nikolaos Georgantzis, 2021. "On Spatially Dependent Risk Preferences: The Case of Nigerian Farmers," Sustainability, MDPI, vol. 13(11), pages 1-16, May.
    3. Freudenreich, Hanna & Musshoff, Oliver, 2022. "Experience of losses and aversion to uncertainty - experimental evidence from farmers in Mexico," Ecological Economics, Elsevier, vol. 195(C).
    4. Tina L. Saitone & Richard J. Sexton & Benoît Malan, 2018. "Price premiums, payment delays, and default risk: understanding developing country farmers’ decisions to market through a cooperative or a private trader," Agricultural Economics, International Association of Agricultural Economists, vol. 49(3), pages 363-380, May.
    5. de Brauw, Alan & Eozenou, Patrick, 2014. "Measuring risk attitudes among Mozambican farmers," Journal of Development Economics, Elsevier, vol. 111(C), pages 61-74.
    6. Julia Ihli, Hanna & Chiputwa, Brian & Winter, Etti & Gassner, Anja, 2022. "Risk and time preferences for participating in forest landscape restoration: The case of coffee farmers in Uganda," World Development, Elsevier, vol. 150(C).
    7. Goytom Abraha Kahsay & Workineh Asmare Kassie & Haileselassie Medhin & Lars Gårn Hansen, 2022. "Are religious farmers more risk taking? Empirical evidence from Ethiopia," Agricultural Economics, International Association of Agricultural Economists, vol. 53(4), pages 617-632, July.
    8. Sophie Clot & Charlotte Y. Stanton & Marc Willinger, 2017. "Are impatient farmers more risk-averse? Evidence from a lab-in-the-field experiment in rural Uganda," Applied Economics, Taylor & Francis Journals, vol. 49(2), pages 156-169, January.
    9. Melesse, Mequanint B. & Cecchi, Francesco, 2017. "Does Market Experience Attenuate Risk Aversion? Evidence from Landed Farm Households in Ethiopia," World Development, Elsevier, vol. 98(C), pages 447-466.
    10. Arnaud A. Reynaud & Stéphane S. Couture, 2011. "Stability of risk preference measures: results from a field experiment on french farmers," Post-Print hal-02803766, HAL.
    11. Liebenehm, Sabine & Waibel, Hermann, 2012. "Simultaneous estimation of risk and time preferences among small-scale cattle farmers in West Africa," Hannover Economic Papers (HEP) dp-501, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    12. Kibet, N. & Obare, G.A. & Lagat, J.K, 2018. "Risk attitude effects on Global-GAP certification decisions by smallholder French bean farmers in Kenya," Journal of Behavioral and Experimental Finance, Elsevier, vol. 18(C), pages 18-29.
    13. Holden, Stein, 2013. "High discount rates: - An artifact caused by poorly framed experiments or a result of people being poor and vulnerable?," CLTS Working Papers 8/13, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 10 Oct 2019.
    14. Nauges, Céline & Bougherara, Douadia & Koussoubé, Estelle, 2021. "Fertilizer use and risk: New evidence from Sub-Saharan Africa," TSE Working Papers 21-1266, Toulouse School of Economics (TSE).
    15. Teklewold, Hailemariam, 2011. "Farming or burning? shadow prices and farmer’s impatience on the allocation of multi-purpose resource in the mixed farming system of Ethiopia," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 116080, European Association of Agricultural Economists.
    16. Reyes, René & Nelson, Harry & Zerriffi, Hisham, 2021. "How do decision makers´ ethnicity and religion influence the use of forests? Evidence from Chile," Forest Policy and Economics, Elsevier, vol. 128(C).
    17. Ahsanuzzaman, & Priyo, Asad Karim Khan & Nuzhat, Kanti Ananta, 2022. "Effects of communication, group selection, and social learning on risk and ambiguity attitudes: Experimental evidence from Bangladesh," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 96(C).
    18. Holden, Stein T., 2018. "The Economics of Fertilizer Subsidies," CLTS Working Papers 9/18, Norwegian University of Life Sciences, Centre for Land Tenure Studies, revised 16 Oct 2019.
    19. Ihli, Hanna Julia & Chiputwa, Brian & Musshoff, Oliver, 2016. "Do Changing Probabilities or Payoffs in Lottery-Choice Experiments Affect Risk Preference Outcomes? Evidence from Rural Uganda," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 41(2), May.
    20. Arnaud Reynaud & Stéphane Couture, 2012. "Stability of risk preference measures: results from a field experiment on French farmers," Theory and Decision, Springer, vol. 73(2), pages 203-221, August.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:eurjdr:v:31:y:2019:i:3:d:10.1057_s41287-018-0168-x. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.palgrave-journals.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.