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Measuring Risk Preferences in Rural Ethiopia

Author

Listed:
  • Ferdinand M. Vieider
  • Abebe Beyene
  • Randall Bluffstone
  • Sahan Dissanayake
  • Zenebe Gebreegziabher
  • Peter Martinsson
  • Alemu Mekonnen

Abstract

Risk aversion is generally found to decrease in income. Between countries, comparative findings with students suggest that people in poorer countries are more risk tolerant, potentially giving rise to a risk-income paradox. We test the robustness of this finding by measuring the risk preferences of 500 household heads in the highlands of Ethiopia. We find high degrees of risk tolerance, consistent with the evidence obtained for students using the same tasks. The level of risk tolerance is higher than for student samples in most Western and middle-income countries. We also find risk tolerance to increase in income proxies within our sample, thus completing the paradox.

Suggested Citation

  • Ferdinand M. Vieider & Abebe Beyene & Randall Bluffstone & Sahan Dissanayake & Zenebe Gebreegziabher & Peter Martinsson & Alemu Mekonnen, 2018. "Measuring Risk Preferences in Rural Ethiopia," Economic Development and Cultural Change, University of Chicago Press, vol. 66(3), pages 417-446.
  • Handle: RePEc:ucp:ecdecc:doi:10.1086/696106
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    Cited by:

    1. Holden, Stein T., 2018. "The Economics of Fertilizer Subsidies," CLTS Working Papers 9/18, Norwegian University of Life Sciences, Centre for Land Tenure Studies.

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