Household responses to shocks in rural Ethiopia: livestock as a buffer stock

Daniel Ayalew Ali

No 7244, Policy Research Working Paper Series from The World Bank

Abstract: This paper uses a stochastic dynamic programming model to characterize the optimal savings-consumption decisions and the role of livestock inventories as a buffer stock in rural Ethiopia. The results show that relatively land-rich households use accumulation and liquidation of cattle and other animal inventories for partial consumption smoothing, while low-income households appear not to do so. The results highlight the need for improvement in livestock markets, which are often affected by high transaction costs and price risk, and for investigation of other approaches to risk management.

Keywords: Economic Theory&Research; Debt Markets; Livestock and Animal Husbandry; Rural Poverty Reduction; Rural Development Knowledge&Information Systems (search for similar items in EconPapers)
Date: 2015-04-21
New Economics Papers: this item is included in nep-agr
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Citations: View citations in EconPapers (1)

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