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Rain and impatience: Evidence from rural Ethiopia

Author

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  • Di Falco, Salvatore
  • Berck, Peter
  • Bezabih, Mintewab
  • Köhlin, Gunnar

Abstract

We have combined farm household panel data, weather data and discount rates, as measured by a hypothetical survey question, to estimate the impact of income on discounting. This paper has found that income variation driven by anomalies in rainfall during the main growing season is a strong predictor of farmers’ subjective discount rates. Farmers prefer a smaller immediate reward to a larger deferred one when affected by negative income shocks, while they display lower discount rates when the income shocks are positive. We have also found that higher discount rates are negatively correlated with profitable agricultural investments.

Suggested Citation

  • Di Falco, Salvatore & Berck, Peter & Bezabih, Mintewab & Köhlin, Gunnar, 2019. "Rain and impatience: Evidence from rural Ethiopia," Journal of Economic Behavior & Organization, Elsevier, vol. 160(C), pages 40-51.
  • Handle: RePEc:eee:jeborg:v:160:y:2019:i:c:p:40-51
    DOI: 10.1016/j.jebo.2019.02.016
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    Keywords

    Subjective discount rates; Impatience; Rainfall anomalies; Ethiopia;

    JEL classification:

    • Q2 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products

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