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Livestock, Activity Choices and Conflict: Evidence from Burundi

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  • Tom Bundervoet

    ()
    (Free University of Brussels)

Abstract

Standard economic risk theory postulates that in the absence of credit markets, wealthier households will engage in higher-risk, higher profit activities to generate income while poor households will specialize in low-risk activities with low returns. The rationale is that wealthier households can deplete savings when things go wrong whereas poor household cannot. This theoretical argument has been tested for several countries and is generally validated by the data. However, existing studies on the relation between savings and activity choices implicitly assume that savings are certain or risk-free. This study suggests that explicitly allowing household savings or assets to be risky can yield results that differ considerably from the pattern predicted by the standard theoretical model. Using data from the 1998 household priority survey in Burundi, we estimate the relationship between household savings (livestock) and choices of incomegenerating activities (risky vs. less-risky activities). We exploit the fact that surveyed households in certain regions in Burundi were exposed to a relative higher level of risk and uncertainty due to the civil war preceding and during the time of the survey. We find that in general household savings exercise their usual risk-taking effect, though that this effect disappears and even reverses for households in the conflict affected regions. In those regions, wealthier households do not reduce allocation to low-risk low-return activities. We argue that this finding can probably (in part) explain the massive increase in poverty in the provinces exposed to the war during the 1990-1998 period. In this fashion, we argue that a type of ’productive social safety net’, as recently discussed in the development literature, could possibly be an effective policy measure to lower the increased asset risk induced by conflict.

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Bibliographic Info

Paper provided by Households in Conflict Network in its series HiCN Working Papers with number 24.

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Length: 34 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:hic:wpaper:24

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Related research

Keywords: Assets; risk; conflict; activity choices; Africa; Burundi;

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References

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Citations

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Cited by:
  1. Patricia Justino, 2009. "The Impact of Armed Civil Conflict on Household Welfare and Policy Responses," Research Working Papers 12, MICROCON - A Micro Level Analysis of Violent Conflict.
  2. Singh, Prakarsh, 2011. "Impact of terrorism on investment decisions of farmers: evidence from the Punjab insurgency," MPRA Paper 33328, University Library of Munich, Germany.
  3. Marijke Verpoorten, 2011. "Measure for Measure: How Well Do We Measure Micro-Level Conflict Intensity?," LICOS Discussion Papers 27511, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
  4. Patricia Justino, 2012. "Nutrition, Governance and Violence: A Framework for the Analysis of Resilience and Vulnerability to Food Insecurity in Contexts of Violent Conflict," HiCN Working Papers 132, Households in Conflict Network.
  5. Patricia Justino & Ivan Cardona & Rebecca Mitchell & Catherine Müller, 2012. "Quantifying the Impact of Women’s Participation in Post-Conflict Economic Recovery," HiCN Working Papers 131, Households in Conflict Network.
  6. Tegebu, Fredu Nega & Mathijs, Erik & Deckers, Jozef A. & Tollens, Eric, 2009. "Rural livestock asset portfolio in northern Ethiopia: A microeconomic analysis of choice and accumulation," 2009 Conference, August 16-22, 2009, Beijing, China 50039, International Association of Agricultural Economists.
  7. Marc Rockmore, 2012. "Living Within Conflicts: Risk of Violence and Livelihood Portfolios," HiCN Working Papers 121, Households in Conflict Network.
  8. Ciarli, Tommaso & Parto, Saeed & Savona, Maria, 2010. "Conflict and Entrepreneurial Activity in Afghanistan: Findings from the National Risk Vulnerability Assessment Data," Working Paper Series UNU-WIDER Working Paper W, World Institute for Development Economic Research (UNU-WIDER).

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