Discount rates and credit markets: Theory and evidence from rural india

Pender, John

doi:10.1016/s0304-3878(96)00400-2

Cited by 254 publications

(204 citation statements)

References 24 publications

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“…It is hypothesized that subjects living in a poor environment, such as our small-holder pastoralists, are generally less patient as has been found in many other studies (e.g. Fisher 1930;Pender 1996;Nielsen 2001;Harrison, Lau, and Williams 2002;Anderson et al 2004). …”

Section: Time Preferencesmentioning

confidence: 81%

Simultaneous Estimation of Risk and Time Preferences among Small‐scale Cattle Farmers in West Africa

Liebenehm¹,

Waibel²

2014

American J Agri Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis study investigates risk and time preferences of small-holder cattle farmers in West Africa. We apply a discounted utility model and jointly estimate a prospect theory-based utility function and a quasi-hyperbolic discounting function using a maximum likelihood method. Results show that West African farmers are less lossaverse and are more patient than suggested by comparable studies in Asian developing countries. The main factors influencing farmers' risk and time preferences are cattle herd size and net revenue from sales of cattle products.

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Section: Time Preferencesmentioning

confidence: 81%

Simultaneous Estimation of Risk and Time Preferences among Small‐scale Cattle Farmers in West Africa

Liebenehm¹,

Waibel²

2014

American J Agri Economics

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“…It has been theorized that poverty may lead to short planning horizons, which may in turn prevent rural households from investing in land use changes that yield benefits in the medium to long-term or conservation initiatives that will contribute to the sustainability of the natural resource base (Mink 1993;Pender 1996). This disincentive to invest in tree planting or conservation is related to the concept of discount rateswhich reflect how much the decision maker values having something today versus having it some time in the future.…”

Section: Discount Rates Portfolio Diversification and Access To Creditmentioning

confidence: 99%

“…If one hypothesizes that the poorest households likely reside on degraded land most in need of reclamation, or are in fact landless, the importance of choosing fast growing species for conservation and economic benefit is evident. It may be the case in some areas of the Ethiopian highlands that 5 or 10-year 30 A discount rate reflects the marginal rate of inter-temporal substitution (Pender 1996). For example, with a discount rate of 50%, benefits received in year one are valued at only two-thirds (1/1.5) the value of an equivalent benefit that is received immediately after the investment is made.…”

Section: Discount Rates Portfolio Diversification and Access To Creditmentioning

confidence: 99%

“…When credit is not constrained, people will theoretically discount at the market rate of interest (Pender 1996). The presence of such high discount rates and informal sector interest rates in Ethiopia (for example, Holden, Shiferaw, and Wik 1998; and Table 11 below) reflects credit constraints and suggests that expanded credit availability could reduce discount rates and make tree planting and other investments more attractive.…”

Section: Discount Rates Portfolio Diversification and Access To Creditmentioning

confidence: 99%

“…In the long run, if credit and tree planting enabled households to satisfy their short-term needs more easily and to increase their wealth status significantly, we could expect households' discount rates to decline, as predicted by the work of Pender (1996) in India and Holden, et al (1998) in Ethiopia. This could have major ecological benefits as rural households become more able to take the future into account in their agricultural management and investment decisions.…”

Section: Facilitate Access To Long-term Credit and Other Factors Favomentioning

confidence: 99%

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The role of trees for sustainable management of less-favored lands: the case of eucalyptus in Ethiopia

Jagger

Pender

2003

Forest Policy and Economics

201

148

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In recent years the planting of eucalyptus trees in Ethiopia has expanded from State owned plantations to community woodlots and household compounds. In an environment suffering from severe woody biomass shortages water scarcity, erosion and land degradation, fast growing and resilient eucalyptus species perform better than most indigenous woodland and forest tree species (as well as most crops). In addition to increasing biomass and providing ground cover, the sale of eucalyptus poles and products has substantial potential to raise farm incomes, reduce poverty, increase food security and diversify smallholder-farming systems in less-favored areas of northern Ethiopia.Despite the potential for eucalyptus to improve rural livelihoods in northern Ethiopia in 1997, the regional government of Tigray imposed a ban on eucalyptus tree planting on farmlands. This ban is related to concerns regarding potential negative environmental externalities associated with eucalyptus and also due to the desire to reserve productive farmland for crop production. The regional government promotes planting of eucalyptus and other species in community woodlots, and has recently begun to allow private planting of eucalyptus on community wasteland and steep hillsides.In this paper, we review the debate about the ecological impacts of eucalyptus trees, as well as the economic factors that influence whether smallholders invest in these trees. Ex ante benefit-cost analysis based on community level survey data from Tigray illustrates that under most conditions planting eucalyptus trees yields high rates of return, well above 20% under most circumstances. The effect of variable harvest rates, the costs of decreased crop production when eucalyptus trees are planted on farmlands, and differences between administrative zones are considered relative to our base case in our rate of return estimates. The importance of fast growing tree species that can accommodate the high discount rates associated with smallholders in this region is emphasized.

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Risk Preferences and Farmers' Livelihood Strategies: A Case Study from Eastern Ethiopia

Molla

Beuving²,

Ruben³

2018

J of Intl Development

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Low‐return livelihood strategies are crucial drivers of food insecurity that may cause irreversible long‐term damage to livelihoods. Experiments and survey results were used to examine the relative importance of risk preference and socio‐economic characteristics for households' decision to engage in specific livelihood strategies in rural Ethiopia. Agricultural intensification and diversification are prevailing strategies, and farming households who participate in non‐farm activities are better off than others. Education, information access, household income and cooperative membership correlate significantly with high participation rates in non‐farm activities and on‐farm diversification. Risk preference is an especially important barrier to households' participation in these strategies. Therefore, policy interventions that help to expand farmers' asset base and reduce entry barriers to these strategies are required to improve smallholders' welfare. Copyright © 2018 John Wiley & Sons, Ltd.

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Discount rates and credit markets: Theory and evidence from rural india

Cited by 254 publications

References 24 publications

Simultaneous Estimation of Risk and Time Preferences among Small‐scale Cattle Farmers in West Africa

Simultaneous Estimation of Risk and Time Preferences among Small‐scale Cattle Farmers in West Africa

The role of trees for sustainable management of less-favored lands: the case of eucalyptus in Ethiopia

Risk Preferences and Farmers' Livelihood Strategies: A Case Study from Eastern Ethiopia

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