Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia

Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper...

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Main Authors:	Dercon, Stefan, Christiaensen, Luc
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AGENTS AGRICULTURE ASSETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS CONSUMER PRICE INDEX CONSUMPTION DECISIONS CONSUMPTION MODEL CONSUMPTION PATH COST OF CREDIT CREDIT CONSTRAINT CREDIT MARKET CREDIT MARKET IMPERFECTIONS CREDIT MARKETS CURRENT CONSUMPTION DATA SET DECISION MAKING DECREASING RATE DEVELOPING COUNTRIES DIFFERENTIAL IMPACT DISTRIBUTION DATA ECONOMIES OF SCALE EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL MODEL EMPIRICAL RESULTS ENDOGENOUS VARIABLE EXPECTED RETURNS EXPECTED VALUE EXPECTED VALUES FIXED COSTS FIXED INPUTS HISTORICAL DATA HOUSEHOLD CHARACTERISTICS HOUSEHOLD COMPOSITION HOUSEHOLD SURVEY HOUSEHOLDS IMPERFECT CREDIT INCOME INCOME PROCESS INCOME SHOCKS INCREASING FUNCTION INEFFICIENCY INFLATION INFORMAL INSURANCE INSURANCE INSURANCE MARKETS INTEREST RATE INTEREST RATES INTERTEMPORAL CONSUMPTION LABOR MARKET LEVELS OF CONSUMPTION LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOW INFLATION MARGINAL PRODUCTIVITY MARGINAL UTILITY MARGINAL UTILITY OF CONSUMPTION MARGINAL VALUE NATURAL LOGARITHM NEGATIVE SHOCKS OPTIMIZATION PERMANENT INCOME POLICY RESEARCH PORTFOLIOS PRICE CHANGES PRICE FIXING PRICE RISK PRODUCT MARKETS PRODUCTION FUNCTION PROFITABILITY PURCHASE PRICE RATIONAL EXPECTATIONS RISK AVERSE RISK AVERSION RISK TAKING SAVINGS SIGNIFICANT IMPACT SUNK COSTS TRANSACTIONS COSTS UTILITY FUNCTION WEALTH
Online Access:	http://documents.worldbank.org/curated/en/2007/06/7726736/consumption-risk-technology-adoption-poverty-traps-evidence-ethiopia http://hdl.handle.net/10986/7417

id	okr-10986-7417
recordtype	oai_dc
spelling	okr-10986-74172021-04-23T14:02:33Z Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia Dercon, Stefan Christiaensen, Luc AGENTS AGRICULTURE ASSETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS CONSUMER PRICE INDEX CONSUMPTION DECISIONS CONSUMPTION MODEL CONSUMPTION PATH COST OF CREDIT CREDIT CONSTRAINT CREDIT MARKET CREDIT MARKET IMPERFECTIONS CREDIT MARKETS CURRENT CONSUMPTION DATA SET DECISION MAKING DECREASING RATE DEVELOPING COUNTRIES DIFFERENTIAL IMPACT DISTRIBUTION DATA ECONOMIES OF SCALE EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL MODEL EMPIRICAL RESULTS ENDOGENOUS VARIABLE EXPECTED RETURNS EXPECTED VALUE EXPECTED VALUES FIXED COSTS FIXED INPUTS HISTORICAL DATA HOUSEHOLD CHARACTERISTICS HOUSEHOLD COMPOSITION HOUSEHOLD SURVEY HOUSEHOLDS IMPERFECT CREDIT INCOME INCOME PROCESS INCOME SHOCKS INCREASING FUNCTION INEFFICIENCY INFLATION INFORMAL INSURANCE INSURANCE INSURANCE MARKETS INTEREST RATE INTEREST RATES INTERTEMPORAL CONSUMPTION LABOR MARKET LEVELS OF CONSUMPTION LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOW INFLATION MARGINAL PRODUCTIVITY MARGINAL UTILITY MARGINAL UTILITY OF CONSUMPTION MARGINAL VALUE NATURAL LOGARITHM NEGATIVE SHOCKS OPTIMIZATION PERMANENT INCOME POLICY RESEARCH PORTFOLIOS PRICE CHANGES PRICE FIXING PRICE RISK PRODUCT MARKETS PRODUCTION FUNCTION PROFITABILITY PURCHASE PRICE RATIONAL EXPECTATIONS RISK AVERSE RISK AVERSION RISK TAKING SAVINGS SIGNIFICANT IMPACT SUNK COSTS TRANSACTIONS COSTS UTILITY FUNCTION WEALTH Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented-the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex-ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance causes inefficiency in production choices. 2012-06-07T17:28:57Z 2012-06-07T17:28:57Z 2007-06 http://documents.worldbank.org/curated/en/2007/06/7726736/consumption-risk-technology-adoption-poverty-traps-evidence-ethiopia http://hdl.handle.net/10986/7417 English Policy Research Working Paper; No. 4257 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Africa Ethiopia
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	AGENTS AGRICULTURE ASSETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS CONSUMER PRICE INDEX CONSUMPTION DECISIONS CONSUMPTION MODEL CONSUMPTION PATH COST OF CREDIT CREDIT CONSTRAINT CREDIT MARKET CREDIT MARKET IMPERFECTIONS CREDIT MARKETS CURRENT CONSUMPTION DATA SET DECISION MAKING DECREASING RATE DEVELOPING COUNTRIES DIFFERENTIAL IMPACT DISTRIBUTION DATA ECONOMIES OF SCALE EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL MODEL EMPIRICAL RESULTS ENDOGENOUS VARIABLE EXPECTED RETURNS EXPECTED VALUE EXPECTED VALUES FIXED COSTS FIXED INPUTS HISTORICAL DATA HOUSEHOLD CHARACTERISTICS HOUSEHOLD COMPOSITION HOUSEHOLD SURVEY HOUSEHOLDS IMPERFECT CREDIT INCOME INCOME PROCESS INCOME SHOCKS INCREASING FUNCTION INEFFICIENCY INFLATION INFORMAL INSURANCE INSURANCE INSURANCE MARKETS INTEREST RATE INTEREST RATES INTERTEMPORAL CONSUMPTION LABOR MARKET LEVELS OF CONSUMPTION LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOW INFLATION MARGINAL PRODUCTIVITY MARGINAL UTILITY MARGINAL UTILITY OF CONSUMPTION MARGINAL VALUE NATURAL LOGARITHM NEGATIVE SHOCKS OPTIMIZATION PERMANENT INCOME POLICY RESEARCH PORTFOLIOS PRICE CHANGES PRICE FIXING PRICE RISK PRODUCT MARKETS PRODUCTION FUNCTION PROFITABILITY PURCHASE PRICE RATIONAL EXPECTATIONS RISK AVERSE RISK AVERSION RISK TAKING SAVINGS SIGNIFICANT IMPACT SUNK COSTS TRANSACTIONS COSTS UTILITY FUNCTION WEALTH
spellingShingle	AGENTS AGRICULTURE ASSETS BORROWING BUDGET CONSTRAINT BUDGET CONSTRAINTS CONSUMER PRICE INDEX CONSUMPTION DECISIONS CONSUMPTION MODEL CONSUMPTION PATH COST OF CREDIT CREDIT CONSTRAINT CREDIT MARKET CREDIT MARKET IMPERFECTIONS CREDIT MARKETS CURRENT CONSUMPTION DATA SET DECISION MAKING DECREASING RATE DEVELOPING COUNTRIES DIFFERENTIAL IMPACT DISTRIBUTION DATA ECONOMIES OF SCALE EMPIRICAL ANALYSIS EMPIRICAL EVIDENCE EMPIRICAL MODEL EMPIRICAL RESULTS ENDOGENOUS VARIABLE EXPECTED RETURNS EXPECTED VALUE EXPECTED VALUES FIXED COSTS FIXED INPUTS HISTORICAL DATA HOUSEHOLD CHARACTERISTICS HOUSEHOLD COMPOSITION HOUSEHOLD SURVEY HOUSEHOLDS IMPERFECT CREDIT INCOME INCOME PROCESS INCOME SHOCKS INCREASING FUNCTION INEFFICIENCY INFLATION INFORMAL INSURANCE INSURANCE INSURANCE MARKETS INTEREST RATE INTEREST RATES INTERTEMPORAL CONSUMPTION LABOR MARKET LEVELS OF CONSUMPTION LIQUIDITY LIQUIDITY CONSTRAINT LIQUIDITY CONSTRAINTS LOW INFLATION MARGINAL PRODUCTIVITY MARGINAL UTILITY MARGINAL UTILITY OF CONSUMPTION MARGINAL VALUE NATURAL LOGARITHM NEGATIVE SHOCKS OPTIMIZATION PERMANENT INCOME POLICY RESEARCH PORTFOLIOS PRICE CHANGES PRICE FIXING PRICE RISK PRODUCT MARKETS PRODUCTION FUNCTION PROFITABILITY PURCHASE PRICE RATIONAL EXPECTATIONS RISK AVERSE RISK AVERSION RISK TAKING SAVINGS SIGNIFICANT IMPACT SUNK COSTS TRANSACTIONS COSTS UTILITY FUNCTION WEALTH Dercon, Stefan Christiaensen, Luc Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
geographic_facet	Africa Ethiopia
relation	Policy Research Working Paper; No. 4257
description	Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented-the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex-ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance causes inefficiency in production choices.
format	Publications & Research :: Policy Research Working Paper
author	Dercon, Stefan Christiaensen, Luc
author_facet	Dercon, Stefan Christiaensen, Luc
author_sort	Dercon, Stefan
title	Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
title_short	Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
title_full	Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
title_fullStr	Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
title_full_unstemmed	Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia
title_sort	consumption risk, technology adoption, and poverty traps : evidence from ethiopia
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2007/06/7726736/consumption-risk-technology-adoption-poverty-traps-evidence-ethiopia http://hdl.handle.net/10986/7417
_version_	1764402008608997376

Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia

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