Consumption Risk, Technology Adoption and Poverty Traps: Evidence From Ethiopia

Abstract

Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests.Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just exante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertiliser. The lack of insurance causes inefficiency in production choices.

Diversity and nutrient balances of urban and peri-urban farms in Ethiopia

“…Farm characteristics and socioeconomic conditions hinder sustainable intensification of agricultural production . We found that high cost of inputs for crop production and high cost of feed for livestock production were the major constraints of UPA across the three Ethiopian cities, in agreement with the findings of Kassie et al (2009) and Dercon and Christiaensen (2011). Therefore, improving the access of FC and VC farmers to inorganic fertilizers, and of LS farmers to feeds must have a high priority.…”

Volatile and Extreme Food Prices, Food Security, and Policy: An Overview

“…Food and feed processors form part of the agricultural value chain, as do biofuel refineries. Seeds, fertilizers, crop protection, and machinery are important inputs in the agricultural production process which increase productivity but may also increase financial risk because input investments have to be paid out of uncertain harvest revenues (Dercon and Christiaensen 2011). Governments and parastatal institutions intervene in markets by changing tariffs, imposing export restrictions or by holding stocks, and selling or buying grains (Demeke et al 2009).…”

Household food security monitoring and evaluation using a resilience indicator: an application of categorical principal component analysis and simple sum of assets in five African countries

“…Evidence suggests that the inability to cope with risk is an impediment to economic growth (Rosenzweig and Binswanger, 1993;Elbers et al, 2003;Dercon et al, 2005;Dercon, 2005;Dercon, 2006;Dercon and Christiaensen, 2008) and plays a role in perpetuating poverty (Collier and Gunning, 1999;Dercon et al, 2005;Dercon, 2005;Dercon, 2006). The decisions households make to mitigate risk have implications for poverty (Dercon, 2006).…”