Attitudes toward uncertainty among the poor: an experiment in rural Ethiopia

Abstract

We investigate risk and ambiguity attitudes among Ethiopian farmers in one of the poorest regions of the world. Strong risk aversion and ambiguity aversion were found with the Ethiopian farmers. We compared their attitudes to those of a Western university student sample elicited by the same decision task. Ambiguity aversion was similar for farmers and students, but farmers were more risk averse. Our results show that ambiguity aversion is not restricted to Western student populations, and that studies of agricultural decisions may benefit from explicitly considering ambiguity attitudes.

Intuition and Reasoning in Choosing Ambiguous and Risky Lotteries

“…Some papers report a positive correlation between subjects' aversion against risk and their ambiguity aversion (Abdellaoui et al 2011, Dimmock et al 2012 Weitzel 2011), but others do not find a significant correlation or even a negative one (Cohen et al 2011, Akay et al 2012, Cubitt et al 2012, Sutter et al 2013. Again, a possible explanation for the different findings is the way in which the attitudes towards risk and ambiguity are measured.…”

Are the poor worse at dealing with ambiguity?

“…And ambiguity aversion has predictive power for real life decisions (Ross et al 2012;Engle-Warnick et al 2011;Sutter et al 2013;Bianchi and Tallon 2014;Dimmock et al 2016a, b). However, the literature on the relationship between risk aversion and income 1 is much richer than the literature on the relationship between ambiguity aversion and income (Akay et al 2012;Butler et al 2014;Dimmock et al 2016b). The main reason for this gap in the literature is that until recently no tools were available to measure ambiguity attitudes in natural circumstances.…”

“…Previous studies in the developing world found no relationship between wealth and ambiguity aversion (Engle-Warnick et al 2011;Akay et al 2012;Cardenas and Carpenter 2013). These studies included proxies for wealth as control variables where the main research questions concerned the relationship between people's ambiguity attitudes and some real life decisions such as adoption of new technologies.…”

“…Some preceding studies made between-group comparisons. For instance, Akay et al (2012) compared ambiguity aversion between Ethiopian farmers and Dutch university students and found no difference. The between-group comparison in his paper shares the problem with other preceding studies that causes of the findings are difficult to identify due to unobserved confounds.…”

A framework for investigating the potential to explore new markets in smallholder farmers in Kenya’s Kiambu West District

“…Therefore, the focus of research efforts to establish the determinants of technology adoption has shifted away from market imperfections and market constraints to the role played by information, education, and social relationships (Akay et al, 2009). For example, a review of 21 studies on the adoption of improved maize varieties in developing countries showed that socio-economic factors such age, education, farming experience, and gender were some of the determinant of attitudinal change among farmers (Kafle, 2010).…”