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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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Bibliographic Details
Main Authors: Dercon, Stefan, Christiaensen, Luc
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
Description
Summary: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.

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