Measures of Attitude Towards Risk and Rate of Time preference: Experimental Evidence from Ethiopia

Course ID
Ethiopian Economics Association (EEA)
Mahmud Yusuf

This study tried to measure farmers’ attitudes towards rates of time preference and risk using an experimental approach. In general poor farm households were found to have high RTP and high level of risk aversion. Given imperfect credit and insurance markets, household wealth (assets) levels were found to be highly correlated to these attitude measures. In the risk experiment, the nature of risk aversion was carefully investigated and a decreasing absolute risk aversion (DARA) and an increasing partial risk aversion (IPRA) behaviors were witnessed by our data. Our experimental measures were extrapolated to actual farm investment behavior and a negative relationship in between RTP and soil conservation decision; and risk aversion and fertilizer adoption decision were observed. Our findings indicate that high discount rate and risk measured in this study imply a rational disregard by most households in the study villages for most of the farm investments decisions.

Corporate Author: Alemayehu Seyoum(Editor) & Ethiopian Economic Association/Ethiopian Economic Policy Research Institute
Publisher: Ethiopian Economic Association (EEA)
Primary Descriptors: Financial risk management
Secondary Descriptor: Probabilities
Geographic Descriptors: Ethiopia
Cataloge Date: 02/27/2013
Call Number: 330.963 PRO 2004
Serial Key Title: Proceedings of the First International Conference on the Ethiopian Economy
Publication catagory: International Conference
Content type: EEA Publication
Volume: II
Publication date: 2013-05-27 23:04:00
Forum or Discussion date: 2013-02-27 14:45:34
Place of publication: Addis Ababa, Ethiopia
Type of material: Book
Current frequency: Annualy
Author: Mahmud Yusuf