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Bayesian Herders: Asymmetric Updating Of Rainfall Beliefs In Response To External Forecasts

  • Lybbert, Travis J.
  • Barrett, Christopher B.
  • McPeak, John G.
  • Luseno, Winnie K.

Temporal climate risk weighs heavily on many of the world's poor. Recent advances in model-based climate forecasting have expanded the range, timeliness and accuracy of forecasts available to decision-makers whose welfare depends on stochastic climate outcomes. There has consequently been considerable recent investment in improved climate forecasting for the developing world. Yet, in cultures that have long used indigenous climate forecasting methods, forecasts generated and disseminated by outsiders using unfamiliar methods may not readily gain the acceptance necessary to induce behavioral change. The value of model-based climate forecasts depends critically on the premise that forecast recipients actually use external forecast information to update their rainfall expectations. We test this premise using unique survey data from pastoralists and agropastoralists in southern Ethiopia and northern Kenya, specifying and estimating a model of herders updating seasonal rainfall beliefs. We find that those who receive and believe model-based seasonal climate forecasts indeed update their priors in the direction of the forecast received, assimilating optimistic forecasts more readily than pessimistic forecasts.

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File URL: http://purl.umn.edu/14762
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Paper provided by Cornell University, Department of Applied Economics and Management in its series Working Papers with number 14762.

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Date of creation: 2003
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Handle: RePEc:ags:cudawp:14762
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  1. Barrett, Christopher B., 2002. "Food security and food assistance programs," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 40, pages 2103-2190 Elsevier.
  2. Rosenzweig, Mark R. & Binswanger, Hans P., 1992. "Wealth, weather risk, and the composition and profitability of agricultural investments," Policy Research Working Paper Series 1055, The World Bank.
  3. Joel L. Schrag, 1999. "First Impressions Matter: A Model Of Confirmatory Bias," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 37-82, February.
  4. David Hirshleifer & TYLER G. SHUMWAY, 2004. "Good Day Sunshine: Stock Returns and the Weather," Finance 0412004, EconWPA.
  5. Camerer, Colin & Loewenstein, George & Weber, Martin, 1989. "The Curse of Knowledge in Economic Settings: An Experimental Analysis," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1232-54, October.
  6. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers 97-251, University of California at Berkeley.
  7. Roll, Richard, 1984. "Orange Juice and Weather," American Economic Review, American Economic Association, vol. 74(5), pages 861-80, December.
  8. C. Barrett & K. Smith & P. Box, 2001. "Not Necessarily In The Same Boat: Heterogeneous Risk Assessment Among East African Pastoralists," Journal of Development Studies, Taylor & Francis Journals, vol. 37(5), pages 1-30.
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