The Effects of Risk and Shocks on Non-Farm Enterprise Development in Rural Ethiopia

Bob Rijkers and Mans Soderbom

World Development, 2013, vol. 45, issue C, 119-136

Abstract: This paper assesses the impact of risk and shocks on non-farm enterprise development in rural Ethiopia using a matched household–enterprise–community dataset augmented with precipitation based measures of risk. The likelihood of running a non-farm firm and the returns to running such firms co-vary with agricultural productivity shocks. Diversification into non-farm activities thus provides limited protection against fluctuations in agricultural performance. This may explain why ex-ante risk has no impact on the likelihood of running a non-farm firm. It nonetheless hampers non-farm enterprise development by repressing investment and inducing sorting into less capital-intensive activities.

Keywords: risk; rural; firms; Africa; Ethiopia; entrepreneurship; investment-climate (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:wdevel:v:45:y:2013:i:c:p:119-136

DOI: 10.1016/j.worlddev.2012.10.013

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