Consumption Discount Rates, Risk Aversion and Wealth in Low-Income Countries: Evidence from a Field Experiment in Rural Ethiopia

Mahmud Yesuf and Randall Bluffstone

Journal of African Economies, 2019, vol. 28, issue 1, 18-38

Abstract: It has been argued that people in low-income countries often have high consumption discount rates (CDRs), which contributes to under-investment in capital, such as education and soil conservation. We use a field experiment to estimate CDRs in rural Ethiopia and find that annual rates range from 43% to 106%. We evaluate whether household wealth affects CDRs and test for synergies with field experiment-derived estimates of risk aversion. We find evidence that respondents who are part of wealthier households have lower CDRs and more risk averse respondents have higher rates.

Keywords: discounting; risk aversion; experimental studies; interval regression (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (3)

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