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Rain and impatience: Evidence from rural Ethiopia

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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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    3. Nigussie, Zerihun & Tsunekawa, Atsushi & Haregeweyn, Nigussie & Tsubo, Mitsuru & Adgo, Enyew & Ayalew, Zemen & Abele, Steffen, 2021. "The impacts of Acacia decurrens plantations on livelihoods in rural Ethiopia," Land Use Policy, Elsevier, vol. 100(C).
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    5. Thiago Scarelli & David N Margolis, 2022. "When You Can't Afford to Wait for a Job: The Role of Time Discounting for Own-Account Workers in Developing Countries," Working Papers halshs-03288728, HAL.
    6. Visser, Martine & le Roux, Leonard & Mulwa, Chalmers K. & Tibesigwa, Byela & Bezabih, Mintewab, 2024. "Adaptive investment with land tenure and weather risk: Behavioral evidence from Tanzania," Journal of Economic Behavior & Organization, Elsevier, vol. 217(C), pages 398-434.
    7. Rita Abdel Sater, 2021. "Essays on the application of behavioural insights to environmental policy [Essais sur l’application des connaissances comportementales aux politiques environnementales]," SciencePo Working papers Main tel-03450909, HAL.
    8. Sven Grüner, 2022. "Rethinking how risk aversion and impatience are linked with cognitive ability: experimental findings from agricultural students and farmers," Journal of Environmental Economics and Policy, Taylor & Francis Journals, vol. 11(3), pages 248-259, July.
    9. Luca Di Corato & Tsegaye Ginbo, 2020. "Climate change and coffee farm relocation in Ethiopia: a real-options approach," Working Papers 2020:02, Department of Economics, University of Venice "Ca' Foscari".

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    More about this item

    Keywords

    Subjective discount rates; Impatience; Rainfall anomalies; Ethiopia;
    All these keywords.

    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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