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Participation in Off-Farm Employment, Risk Preferences, and Weather Variability: The Case of Ethiopia

Author

Listed:
  • Bezabih, Mintewab
  • Gebreegziabher, Zenebe
  • GebreMedhin, Liyousew
  • Kohlin, Gunnar

Abstract

This article assesses the relative importance of risk preferences and rainfall availability on households’ decision to engage in off-farm employment. Devoting time for off-farm activities, while it helps households earn additional incomes, involves a number of uncertainties. Unique panel data from Ethiopia which includes experimentally generated risk preference measures combined with longitudinal rainfall data is used in the analysis. An off farm participation decision and activity choice showed that both variability and reduced availability of rainfall as well as neutral risk preferences increase the likelihood of off-farm participation. From policy perspective, the results imply that expanding off farm opportunities could act as safety nets in the face of weather uncertainty. In addition, policy initiatives geared towards encouraging income diversification through off farm employment need to address underlying factor that condition risk bearing ability of households.

Suggested Citation

  • Bezabih, Mintewab & Gebreegziabher, Zenebe & GebreMedhin, Liyousew & Kohlin, Gunnar, 2010. "Participation in Off-Farm Employment, Risk Preferences, and Weather Variability: The Case of Ethiopia," 2010 AAAE Third Conference/AEASA 48th Conference, September 19-23, 2010, Cape Town, South Africa 95784, African Association of Agricultural Economists (AAAE);Agricultural Economics Association of South Africa (AEASA).
  • Handle: RePEc:ags:aaae10:95784
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    References listed on IDEAS

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    1. Frank Ellis, 1998. "Household strategies and rural livelihood diversification," Journal of Development Studies, Taylor & Francis Journals, vol. 35(1), pages 1-38.
    2. Rosenzweig, Mark R & Binswanger, Hans P, 1993. "Wealth, Weather Risk and the Composition and Profitability of Agricultural Investments," Economic Journal, Royal Economic Society, vol. 103(416), pages 56-78, January.
    3. 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.
    4. Bezu, Sosina & Barrett, Christopher B., 2010. "Activity Choice in Rural Non-farm Employment (RNFE): Survival versus accumulative strategy," MPRA Paper 55034, University Library of Munich, Germany.
    5. Barrett, C. B. & Reardon, T. & Webb, P., 2001. "Nonfarm income diversification and household livelihood strategies in rural Africa: concepts, dynamics, and policy implications," Food Policy, Elsevier, vol. 26(4), pages 315-331, August.
    6. Berdegue, Julio A. & Ramirez, Eduardo & Reardon, Thomas & Escobar, German, 2001. "Rural Nonfarm Employment and Incomes in Chile," World Development, Elsevier, vol. 29(3), pages 411-425, March.
    7. Deininger, Klaus & Jin, Songqing, 2006. "Tenure security and land-related investment: Evidence from Ethiopia," European Economic Review, Elsevier, vol. 50(5), pages 1245-1277, July.
    8. Jalan, Jyotsna & Ravallion, Martin, 2001. "Household income dynamics in rural China," Policy Research Working Paper Series 2706, The World Bank.
    9. Sophia Rabe-Hesketh & Anders Skrondal & Andrew Pickles, 2004. "GLLAMM Manual," U.C. Berkeley Division of Biostatistics Working Paper Series 1160, Berkeley Electronic Press.
    10. Stefan Dercon, 2002. "Income Risk, Coping Strategies, and Safety Nets," World Bank Research Observer, World Bank Group, vol. 17(2), pages 141-166, September.
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    12. Clay, Daniel C. & Molla, Daniel & Habtewold, Debebe, 1999. "Food aid targeting in Ethiopia: A study of who needs it and who gets it," Food Policy, Elsevier, vol. 24(4), pages 391-409, August.
    13. Lanjouw, Jean O. & Lanjouw, Peter, 2001. "The rural non-farm sector: issues and evidence from developing countries," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 26(1), October.
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    More about this item

    Keywords

    Off-farm employment; labor supply; rainfall variability/reduced availability; risk preferences; GLLAMM; Ethiopia; Labor and Human Capital; Q13; D81; C35; C93;

    JEL classification:

    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments

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