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Understanding the investment and abandonment behavior of poor households: An empirical investigation

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  • Vargas Hill, Ruth

Abstract

"This paper uses models of irreversible investment under uncertainty to examine the investment and abandonment behavior of poor rural households. It considers the decision of Ugandan coffee-farming households to invest in or abandon coffee trees. The observed levels of investment and abandonment are found to be consistent with models of investment that allow for irreversibility, uncertainty, fixed costs and liquidity constraints. The findings highlight the importance of addressing volatility, irreversibility, fixed costs and liquidity constraints in order to increase households' responsiveness to changes in the fundamentals, and to enable households to recover from shocks to their capital stock." from Author's Abstract

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series IFPRI discussion papers with number 783.

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Date of creation: 2008
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Handle: RePEc:fpr:ifprid:783

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Related research

Keywords: Investment; Uncertainty; Fixed costs; Shocks; Models of friction; High-value agriculture;

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Cited by:
  1. Ihli, Hanna Julia & Maart, Syster Christin & Musshoff, Oliver, 2012. "Investment and Disinvestment in Irrigation Technology – An Experimental Analysis of Farmers’ Decision Behavior –," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124532, Agricultural and Applied Economics Association.

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