Understanding the investment and abandonment behavior of poor households: An empirical investigation

Ruth Hill

No 783, IFPRI discussion papers from International Food Policy Research Institute (IFPRI)

Abstract: "This paper uses models of irreversible investment under uncertainty to examine the investment and abandonment behavior of poor rural households. It considers the decision of Ugandan coffee-farming households to invest in or abandon coffee trees. The observed levels of investment and abandonment are found to be consistent with models of investment that allow for irreversibility, uncertainty, fixed costs and liquidity constraints. The findings highlight the importance of addressing volatility, irreversibility, fixed costs and liquidity constraints in order to increase households' responsiveness to changes in the fundamentals, and to enable households to recover from shocks to their capital stock." from Author's Abstract

Keywords: investment; shock; high-value agricultural products; households; Uganda; Eastern Africa; Sub-Saharan Africa (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-agr and nep-dev
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fpr:ifprid:783

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