Risk Preferences and Environmental Uncertainty: Implications for Crop Diversification Decisions in Ethiopia
To the extent that diversifying income portfolio is used as a strategy for shielding against production risk, both individual risk preferences and weather uncertainty could affect crop diversification decisions. This paper is concerned with empirically assessing the effects of risk preferences and rainfall variability on farm level diversity. Unique panel data from Ethiopia consisting of experimentally generated risk preference measures combined with rainfall data are employed in the analysis. The major contribution of this study is its explicit treatment of individual risk preferences in the decision to diversify, simultaneously controlling for environmental risk in the form of rainfall variability. Covariate shocks from rainfall variability are found to positively contribute to an increased level of diversity with individual risk aversion having a positive but less significant role. We find that rainfall variability in spring has a greater effect than rainfall variability summerâ€”the major rainy season. This finding is in line with similar agronomic-meteorological studies. These results imply that in situ biodiversity conservation could be effective in areas with high rainfall variability. However, reduction in risk aversion, which is associated with poverty reduction, is likely to reduce in situ conservation.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 021 671-3980
Fax: +27 21 671 3912
Web page: http://www.econrsa.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Tilman, David & Polasky, Stephen & Lehman, Clarence, 2005. "Diversity, productivity and temporal stability in the economies of humans and nature," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 405-426, May.
- Hans Binswanger, 1980. "Attitudes toward risk: Experimental measurement in rural india," Artefactual Field Experiments 00009, The Field Experiments Website.
- Stefan Dercon, 1993.
"Risk, crop choice and saving: evidence from Tanzania,"
CSAE Working Paper Series
1993-02, Centre for the Study of African Economies, University of Oxford.
- Dercon, Stefan, 1996. "Risk, Crop Choice, and Savings: Evidence from Tanzania," Economic Development and Cultural Change, University of Chicago Press, vol. 44(3), pages 485-513, April.
- Stefan Dercon, 1993. "Risk, crop choice and savings: evidence from Tanzania," Economics Series Working Papers WPS/1993-02, University of Oxford, Department of Economics.
- Marcel Fafchamps & Takashi Kurosaki, 2000.
"Insurance Market Efficiency and Crop Choices in Pakistan,"
Economics Series Working Papers
12, University of Oxford, Department of Economics.
- Kurosaki, Takashi & Fafchamps, Marcel, 2002. "Insurance market efficiency and crop choices in Pakistan," Journal of Development Economics, Elsevier, vol. 67(2), pages 419-453, April.
- Takashi Kurosaki & Marcel Fafchamps, 1998. "Insurance Market Efficiency and Crop Choices in Pakistan," Discussion Paper Series a358, Institute of Economic Research, Hitotsubashi University.
- Takashi Kurosaki & Marcel Fafchamps, 1997. "Insurance Market Efficiency and Crop Choices in Pakistan," Working Papers 97010, Stanford University, Department of Economics.
- Jeffrey M. Wooldridge, 2001.
"Econometric Analysis of Cross Section and Panel Data,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262232197, June.
- Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, June.
- Di Falco, Salvatore & Bezabih, Mintewab & Yesuf, Mahmud, 2010. "Seeds for livelihood: Crop biodiversity and food production in Ethiopia," Ecological Economics, Elsevier, vol. 69(8), pages 1695-1702, June.
- Hans Binswanger, 1981.
"Attitudes toward risk: Theoretical implications of an experiment in rural india,"
Artefactual Field Experiments
00010, The Field Experiments Website.
- Binswanger, Hans P, 1981. "Attitudes toward Risk: Theoretical Implications of an Experiment in Rural India," Economic Journal, Royal Economic Society, vol. 91(364), pages 867-90, December.
- Mahmud Yesuf & Randall A. Bluffstone, 2009. "Poverty, Risk Aversion, and Path Dependence in Low-Income Countries: Experimental Evidence from Ethiopia," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(4), pages 1022-1037.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Chavas, Jean-Paul & Holt, Matthew T, 1996. "Economic Behavior under Uncertainty: A Joint Analysis of Risk Preferences and Technology," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 329-35, May.
- Salvatore Di Falco & Charles Perrings, 2004.
"Crop Biodiversity, Risk Management and the Implications of Agricultural Assistance,"
0084, National University of Ireland Galway, Department of Economics, revised 2004.
- Di Falco, Salvatore & Perrings, Charles, 2005. "Crop biodiversity, risk management and the implications of agricultural assistance," Ecological Economics, Elsevier, vol. 55(4), pages 459-466, December.
- Stefan Baumgärtner & Martin F. Quaas, 2010.
"Managing increasing environmental risks through agrobiodiversity and agrienvironmental policies,"
International Association of Agricultural Economists, vol. 41(5), pages 483-496, 09.
- Stefan Baumgärtner & Martin F. Quaas, 2008. "Managing increasing environmental risks through agro-biodiversity and agri-environmental policies," Working Paper Series in Economics 80, University of Lüneburg, Institute of Economics.
- Stefan Baumgärtner & Martin F. Quaas, 2007. "Agro-biodiversity as natural insurance and the development of financial insurance markets," Working Paper Series in Economics 61, University of Lüneburg, Institute of Economics.
- Joseph R. Blasi & Douglas L. Kruse & Harry M. Markowitz, 2008.
"Risk and Lack of Diversification under Employee Ownership and Shared Capitalism,"
NBER Working Papers
14229, National Bureau of Economic Research, Inc.
- Joseph R. Blasi & Douglas L. Kruse & Harry M. Markowitz, 2010. "Risk and Lack of Diversification under Employee Ownership and Shared Capitalism," NBER Chapters, in: Shared Capitalism at Work: Employee Ownership, Profit and Gain Sharing, and Broad-based Stock Options, pages 105-136 National Bureau of Economic Research, Inc.
- Salvatore Di Falco & Jean-Paul Chavas, 2006. "Crop genetic diversity, farm productivity and the management of environmental risk in rainfed agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 33(3), pages 289-314, September.
- Stefan Dercon, 2003.
"Growth and Shocks: evidence from rural Ethiopia,"
Economics Series Working Papers
WPS/2003-12, University of Oxford, Department of Economics.
- Hausman, Jerry A & Taylor, William E, 1981.
"Panel Data and Unobservable Individual Effects,"
Econometric Society, vol. 49(6), pages 1377-98, November.
- Heaton, John & Lucas, Deborah, 2000. "Portfolio Choice in the Presence of Background Risk," Economic Journal, Royal Economic Society, vol. 110(460), pages 1-26, January.
- Teklewold, Hailemariam & Köhlin, Gunnar, 2010. "Risk Preferences as Determinants of Soil Conservation Decisions in Ethiopia," Discussion Papers dp-10-19-efd, Resources For the Future.
- Andrew P. Barkley & Lori L. Porter, 1996. "The Determinants of Wheat Variety Selection in Kansas, 1974 to 1993," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(1), pages 202-211.
- Adesina, Akinwumi A. & Zinnah, Moses M., 1993. "Technology characteristics, farmers' perceptions and adoption decisions: A Tobit model application in Sierra Leone," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 9(4), December.
- Melinda Smale & Jason Hartell & Paul W. Heisey & Ben Senauer, 1998. "The Contribution of Genetic Resources and Diversity to Wheat Production in the Punjab of Pakistan," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(3), pages 482-493.
- Van Dusen, M. Eric, 2000. "In Situ Conservation Of Crop Genetic Resources In The Mexican Milpa System," Dissertations 11941, University of California, Davis, Department of Agricultural and Resource Economics.
When requesting a correction, please mention this item's handle: RePEc:rza:wpaper:322. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yoemna Mosaval)
If references are entirely missing, you can add them using this form.