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Disentangling Poor Smallholder Farmers’ Risk Preferences and Time Horizons: Evidence from a Field Experiment in Ethiopia

  • Molla AlemayehuEmail author
  • Joost Beuving
  • Ruerd Ruben
Original Article
  • 35 Downloads

Abstract

This paper considers the economic behaviour of smallholder farmers in eastern Ethiopia and its effects on their poverty status, looking specifically at how farmers deal with production risk and various time horizons. Earlier studies in rural Africa suggested that these are interlinked but that remains analytically unsatisfactory. Through experiments, we seek to disentangle risk preferences and time horizons regarding their impact on poverty. We find that the studied farmers are highly risk-averse and time-impatient; few farmers make longer-term investments. This appears to be covariant with wealth and household indicators, with poorer, less-educated farmers with smaller landholdings making less risky investments, thus yielding smaller returns, which shorten their time horizons. This finding is relevant for rural development policies, in particular suggesting how untying the Gordian knot of risk and time that reproduces rural poverty depends on the simultaneous operation of market and state forces.

Keywords

Ethiopia Rural poverty Smallholder farmers Risk behaviour Time preference Experimental economics 

Résumé

Cet article étudie le comportement économique des petits exploitants agricoles dans l’est de l’Éthiopie et ses effets sur leur situation de pauvreté, en examinant en particulier la manière dont les agriculteurs traitent les risques liés à la production et les divers horizons temporels. Des études antérieures menées en Afrique rurale ont suggéré que ceux-ci (le risque et le temps) sont liés entre eux mais cela reste insatisfaisant d’un point de vue analytique. À travers une approche expérimentale, nous cherchons à démêler l’impact qu’ont les préférences de risque et les horizons temporels sur la pauvreté. Nous trouvons que les agriculteurs qui font partie de l’étude ont une aversion au risque et sont impatients; peu d’agriculteurs font des investissements à plus long terme. Cela semble être corrélé aux indicateurs de richesse et ménage: les agriculteurs les plus pauvres et ayant un niveau d’études moindre, dotés de propriétés foncières plus petites, effectuent des investissements moins risqués, produisant ainsi des rendements plus faibles, ce qui raccourcit leur horizon temporel. Cette constatation est pertinente pour les politiques de développement rural, suggérant notamment que dénouer le nœud gordien risque-temps, qui engendre la pauvreté en milieu rural, dépend du fonctionnement simultané des forces du marché et des forces de l’État.

Notes

Acknowledgements

The authors would like to thank two anonymous reviewers as well as the editor for their comments. Financial assistance from NUFFIC (NICHE/ETH/019) project is well acknowledged. On behalf of all authors, the corresponding author states that there is no conflict of interest.

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Copyright information

© European Association of Development Research and Training Institutes (EADI) 2018

Authors and Affiliations

  1. 1.Radboud Social Cultural ResearchRadboud University NijmegenNijmegenThe Netherlands
  2. 2.Wageningen Economic ResearchWageningen University and ResearchWageningenThe Netherlands

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