Advanced Search
MyIDEAS: Login to save this paper or follow this series

On the interaction between risk-taking and risk-sharing under farm household wealth heterogeneity

Contents:

Author Info

  • DELPIERRE Matthieu
  • VERHEYDEN Bertrand
  • WEYNANTS Stéphanie

Abstract

Empirical evidence on developing countries shows on the one hand that rich farm-households are more keen to adopt new technologies and are higher risk takers than poor households. On the other hand, however, they are shown to be less vulnerable to income shocks than poor farmers. This paper provides a rationale for these observations. Risk averse agents, heterogeneously endowed with wealth, non-cooperatively decide on their level of subscription to risk-sharing and on the degree of individual production risk they take. Rich households take more risks and subscribe more to risk-sharing. Although risk-sharing allows all households to cope with idiosyncratic shocks, the risk-taking behavior of rich households increases the covariate component of poor households income variance through risk-sharing, deterring the participation of the poor. These poor households in turn opt for safer but less productive production plans.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.ceps.lu/publi_viewer.cfm?tmp=1652
Download Restriction: no

Bibliographic Info

Paper provided by CEPS/INSTEAD in its series CEPS/INSTEAD Working Paper Series with number 2011-35.

as in new window
Length: 28 pages
Date of creation: Jul 2011
Date of revision:
Handle: RePEc:irs:cepswp:2011-35

Contact details of provider:
Postal: 3, avenue de la Fonte, L-4364 Esch-sur-Alzette, G.-D. Luxembourg
Phone: 00352 / 58 58 55 - 1
Fax: 00352 / 58 58 55 - 700
Web page: http://www.ceps.lu
More information through EDIRC

Related research

Keywords: Risk-taking; risk-sharing; technology adoption; farm household;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Townsend, Robert M, 1994. "Risk and Insurance in Village India," Econometrica, Econometric Society, vol. 62(3), pages 539-91, May.
  2. Fafchamps, Marcel & Lund, Susan, 2003. "Risk-sharing networks in rural Philippines," Journal of Development Economics, Elsevier, vol. 71(2), pages 261-287, August.
  3. Garance Genicot & Debraj Ray, 2003. "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies, Oxford University Press, vol. 70(1), pages 87-113.
  4. Oriana Bandiera & Imran Rasul, 2002. "Social networks and technology adoption in Northern Mozambique," LSE Research Online Documents on Economics 3539, London School of Economics and Political Science, LSE Library.
  5. Ligon, Ethan & Thomas, Jonathan P & Worrall, Tim, 2002. "Informal Insurance Arrangements with Limited Commitment: Theory and Evidence from Village Economies," Review of Economic Studies, Wiley Blackwell, vol. 69(1), pages 209-44, January.
  6. Flore Gubert & Anne-Sophie Robilliard, 2008. "Risk and Schooling Decisions in Rural Madagascar: A Panel Data-Analysis," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 17(2), pages 207-238, March.
  7. Stefan Dercon, 2000. "Income risk, coping strategies and safety nets," Economics Series Working Papers WPS/2000-26, University of Oxford, Department of Economics.
  8. Kocherlakota, Narayana R, 1996. "Implications of Efficient Risk Sharing without Commitment," Review of Economic Studies, Wiley Blackwell, vol. 63(4), pages 595-609, October.
  9. Dercon, Stefan & Christiaensen, Luc, 2011. "Consumption risk, technology adoption and poverty traps: Evidence from Ethiopia," Journal of Development Economics, Elsevier, vol. 96(2), pages 159-173, November.
  10. Jonathan P. Thomas & Tim Worrall, 2000. "Gift-giving, Quasi-Credit and Reciprocity," Development and Comp Systems 0004005, EconWPA.
  11. Murgai, Rinku & Winters, Paul & Sadoulet, Elisabeth & Janvry, Alain de, 2002. "Localized and incomplete mutual insurance," Journal of Development Economics, Elsevier, vol. 67(2), pages 245-274, April.
  12. Verpoorten, Marijke, 2009. "Household coping in war- and peacetime: Cattle sales in Rwanda, 1991-2001," Journal of Development Economics, Elsevier, vol. 88(1), pages 67-86, January.
  13. Stefan Dercon, 1996. "Wealth, risk and activity choices: cattle in Western Tanzania," CSAE Working Paper Series 1996-08, Centre for the Study of African Economies, University of Oxford.
  14. Harounan Kazianga & Christopher Udry, 2004. "Consumption Smoothing? Livestock, Insurance and Drought in Rural Burkina Faso," Working Papers 898, Economic Growth Center, Yale University.
  15. Morduch, J., 1995. "Income Smoothing and Consumption Smoothing," Papers 512, Harvard - Institute for International Development.
  16. Takashi Kurosaki & Marcel Fafchamps, 1997. "Insurance Market Efficiency and Crop Choices in Pakistan," Working Papers 97010, Stanford University, Department of Economics.
  17. Sarpong, Daniel Bruce & Asuming-Brempong, Samuel, 2004. "Responding to Economic Shocks in Ghana: The Agricultural Sector as a Social Safety Net," eJADE: electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization, Agricultural and Development Economics Division, vol. 1(1).
  18. Richard Akresh, 2009. "Flexibility of Household Structure: Child Fostering Decisions in Burkina Faso," Journal of Human Resources, University of Wisconsin Press, vol. 44(4).
  19. Coate, Stephen & Ravallion, Martin, 1993. "Reciprocity without commitment : Characterization and performance of informal insurance arrangements," Journal of Development Economics, Elsevier, vol. 40(1), pages 1-24, February.
  20. Stefan Dercon & Joachim De Weerdt, 2002. "Risk-sharing Networks and Insurance against illness," Economics Series Working Papers WPS/2002-16, University of Oxford, Department of Economics.
  21. Hans Hoogeveen, 2002. "Evidence on Informal Insurance in Rural Zimabwe," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 11(2), pages 249-278, June.
  22. Udry, Christopher, 1994. "Risk and Insurance in a Rural Credit Market: An Empirical Investigation in Northern Nigeria," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 495-526, July.
  23. Manuela Angelucci & Giacomo de Giorgi & Imran Rasul & Marcos A. Rangel, 2010. "Insurance and Investment within Family Networks," Working Papers id:2649, eSocialSciences.
  24. Jalan, Jyotsna & Ravallion, Martin, 1997. "Are the poor less well-insured? Evidence on vulnerability to income risk in rural China," Policy Research Working Paper Series 1863, The World Bank.
  25. Jacoby, Hanan G & Skoufias, Emmanuel, 1997. "Risk, Financial Markets, and Human Capital in a Developing Country," Review of Economic Studies, Wiley Blackwell, vol. 64(3), pages 311-35, July.
  26. John McPeak, 2004. "Contrasting income shocks with asset shocks: livestock sales in northern Kenya," Oxford Economic Papers, Oxford University Press, vol. 56(2), pages 263-284, April.
  27. Beegle, Kathleen & Dehejia, Rajeev H. & Gatti, Roberta & Krutikova, Sofya, 2008. "The consequences of child labor : evidence from longitudinal data in rural Tanzania," Policy Research Working Paper Series 4677, The World Bank.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:irs:cepswp:2011-35. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Begona Levices).

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 references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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