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

Molla Alemayehu (), Joost Beuving () and Ruerd Ruben ()
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Molla Alemayehu: Radboud University Nijmegen
Joost Beuving: Radboud University Nijmegen
Ruerd Ruben: Wageningen University and Research

The European Journal of Development Research, 2019, vol. 31, issue 3, No 10, 558-580

Abstract: 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 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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DOI: 10.1057/s41287-018-0168-x

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