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Shocks and Asset Dynamics in Ethiopia

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  • Tewodaj Mogues

Abstract

This article uses household survey panel data of 416 rural households to study asset dynamics in the northern highlands of Ethiopia and the response of assets to shocks. The period under examination (1996-2003) was marked by severe environmental shocks, including a series of droughts. The article empirically studies the nature of household asset paths over time, using as the point of departure the theory on precautionary savings behavior. Results indicate that the response of assets to weather shocks, the differential effect of these shocks on liquid and less liquid forms of wealth holdings, and the nature of asset dynamics are all consistent with the implications of a precautionary motive for holding wealth.

Suggested Citation

  • Tewodaj Mogues, 2011. "Shocks and Asset Dynamics in Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 60(1), pages 91-120.
  • Handle: RePEc:ucp:ecdecc:doi:10.1086/661221
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    References listed on IDEAS

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    1. Kuehlwein, Michael, 1991. "A test for the presence of precautionary saving," Economics Letters, Elsevier, vol. 37(4), pages 471-475, December.
    2. Lee, Jeong-Joon & Sawada, Yasuyuki, 2010. "Precautionary saving under liquidity constraints: Evidence from rural Pakistan," Journal of Development Economics, Elsevier, vol. 91(1), pages 77-86, January.
    3. McPeak, John, 2006. "Confronting the risk of asset loss: What role do livestock transfers in northern Kenya play?," Journal of Development Economics, Elsevier, vol. 81(2), pages 415-437, December.
    4. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    5. Fafchamps, Marcel & Pender, John, 1997. "Precautionary Saving, Credit Constraints, and Irreversible Investment: Theory and Evidence from Semiarid India," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(2), pages 180-194, April.
    6. John Giles & Kyeongwon Yoo, 2007. "Precautionary Behavior, Migrant Networks, and Household Consumption Decisions: An Empirical Analysis Using Household Panel Data from Rural China," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 534-551, August.
    7. Andersson, Camilla & Mekonnen, Alemu & Stage, Jesper, 2011. "Impacts of the Productive Safety Net Program in Ethiopia on livestock and tree holdings of rural households," Journal of Development Economics, Elsevier, vol. 94(1), pages 119-126, January.
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    Cited by:

    1. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Filipski, Mateusz, 2015. "Farmers' Coping Strategies against an Aggregate Shock: Evidence from the 2008 Sichuan Earthquake," 2015 Conference, August 9-14, 2015, Milan, Italy 211814, International Association of Agricultural Economists.
    2. Kurosaki, Takashi, 2015. "Household-Level Recovery after Floods in a Tribal and Conflict-Ridden Society," CEI Working Paper Series 2015-5, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    3. repec:eee:wdevel:v:96:y:2017:i:c:p:264-275 is not listed on IDEAS
    4. Karim, Azreen, 2016. "The household response to persistent natural disasters: Evidence from Bangladesh," Working Paper Series 4968, Victoria University of Wellington, School of Economics and Finance.
    5. Ngigi, Marther W. & Birner, Regina, 2013. "Shocks, livestock assets and climate change adaptation in Kenya," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161468, African Association of Agricultural Economists (AAAE).
    6. Azreen Karim & Ilan Noy, 2016. "Poverty and Natural Disasters: A Meta-Regression Analysis," Review of Economics and Institutions, Università di Perugia, vol. 7(2).
    7. Kurosaki, Takashi, 2013. "Dynamics of Household Assets and Income Shocks in the Long-run Process of Economic Development: The Case of Rural Pakistan," PRIMCED Discussion Paper Series 39, Institute of Economic Research, Hitotsubashi University.
    8. Motoi Kusadokoro & Takeshi Maru & Masanori Takashima, 2016. "Asset Accumulation in Rural Households during the Post-Showa Depression Reconstruction: A Panel Data Analysis," Asian Economic Journal, East Asian Economic Association, vol. 30(2), pages 221-246, June.
    9. Jin, Ling & Chen, Kevin Z. & Yu, Bingxin & Huang, Zuhui, 2011. "How prudent are rural households in developing transition economies:," IFPRI discussion papers 1127, International Food Policy Research Institute (IFPRI).
    10. Kurosaki, Takashi, 2017. "Household-Level Recovery after Floods in a Tribal and Conflict-Ridden Society," World Development, Elsevier, vol. 94(C), pages 51-63.
    11. Jean-Francois Maystadt & Olivier Ecker & Athur Mabiso, 2013. "Extreme Weather and Civil War in Somalia: Does Drought Fuel Conflict through Livestock Price Shocks?," LICOS Discussion Papers 32613, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    12. repec:eee:wdevel:v:103:y:2018:i:c:p:40-59 is not listed on IDEAS

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