Drought and Saving in West Africa: Are Livestock a Buffer Stock?

Abstract

Households in the west African semi-arid tropics, as in much of the developing world, face substantial risk --an inevitable consequence of engaging in rainfed agriculture in a drought-prone environment. It has long been hypothesized that these households keep livestock as a buffer stock to insulate their consumption from fluctuations in income. This paper has the simple goal of testing that hypothesis. Our results indicate that livestock transactions play less of a consumption smoothing role than is often assumed. Livestock sales compensate for at most thirty percent, and probably closer to twenty percent of income shortfalls due to village-level shocks alone. We discuss possible explanations for these results and suggest directions for future work.

Dealing with Drought‐Related Credit and Liquidity Risks in MFIs: Evidence from Africa

“…Th e credit risk induced by drought can be heightened further by its adverse eff ect on clients ' collaterals and by the loss and devaluation of clients ' assets. Loss and devaluation of assets during a drought is more relevant for rural clients whose sale of assets (such as livestock) can be ineffective, especially when livestock markets are thin and fairly inactive ( Fafchamps et al ., 1998 ). For the MFI, this means a lower market value of clients ' assets to rely on in case of default.…”

Testing Asset Dynamics for Poverty Traps in Rural China

“…For example, Rosenzweig and Wolpin's (1993) study in rural India indicates that, bullocks, a source of mechanical power, can also be sold to smooth consumption when faced with income shocks. However, an emerging literature suggests that poor households may intentionally trade off consumption in the short run in order to preserve assets needed for future consumption (see Dréze and Sen 1989;Fafchamps et al 1998;Zimmerman and Carter 2003;Hoddinott 2006;Kazianga and Udry 2006;Carter et al 2007;Carter and Lybbert 2012;Gentle and Maraseni 2012). For example, Zimmerman and Carter (2003) find that wealthier agents pursue conventional consumption smoothing, while poorer agents pursue asset smoothing.…”

Andean Livelihood Strategies and the Livestock Portfolio

“…Livestock species, for example cattle, sheep, goats and poultry, their quality (improved versus local), the types of products these species generate and who controls the income stream, define their many roles in the economic portfolio and the livelihoods of individuals and families. Livestock, as a store of wealth or asset, fills the vacuum of savings institutions and is liquidated to invest in profitable activities, in human capital, and other forms of capital such as fertilizer, machinery and land; livestock also plays an important role in coping with stress or shock (Fafchamps 1998), by selling small animals to buy food when crops fail. Cattle are often a productive capital (Zimmerman and Carter 2003) that is not sold unless a major investment is intended.…”