Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies
Risk-aversion has generally been found to decrease in income. This may lead one to expect that poor countries will be more risk-averse than rich countries. Recent comparative findings with students, however, suggest the opposite, giving rise to a r...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank Group, Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2014/12/23026054/measuring-risk-preferences-rural-ethiopia-risk-tolerance-exogenous-income-proxies http://hdl.handle.net/10986/21135 |
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okr-10986-211352021-04-23T14:04:01Z Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies Vieider, Ferdinand M. Beyene, Abebe Bluffstone, Randall Dissanayake, Sahan Gebreegziabher, Zenebe Martinsson, Peter Mekonnen, Alemu APPLICATIONS CATASTROPHIC EVENTS CLASSICAL ECONOMICS CORRELATION ANALYSIS CORRELATIONS DATA QUALITY DECISION MAKING DECISION THEORY DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC CONDITIONS ECONOMIC GROWTH ECONOMIC IMPLICATIONS ECONOMIC THEORY EXPECTED UTILITY EXPECTED VALUE EXPERIMENTAL DATA EXPERIMENTAL ECONOMICS FAMINE FARMERS FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH THEORY HUMAN CAPITAL HYPOTHESES INCENTIVE EFFECTS INCOME INCOME MEASURES INDEPENDENT VARIABLES INSTRUMENTAL VARIABLES INSURANCE INVESTIGATIONS LOTTERIES LOTTERY LOW TRUST MARGINAL UTILITY MATRIX MAXIMUM LIKELIHOOD ESTIMATION MEDICINE NEUTRALITY OPTIMIZATION POLITICAL ECONOMY POOR FARMERS PROBABILITIES PROBABILITY PRODUCTIVITY PROGRAMS PURCHASING POWER RANDOMIZATION RATES REGRESSION ANALYSIS RISK AVERSE RISK AVERSION RISK EXPOSURE RISK MANAGEMENT RISK NEUTRAL RISK PREMIUM STANDARD ERRORS STARVATION STATA STRUCTURAL MODELING UTILITY FUNCTION UTILITY FUNCTIONS UTILITY THEORY VALIDITY WEALTH WORLD HEALTH ORGANIZATION Risk-aversion has generally been found to decrease in income. This may lead one to expect that poor countries will be more risk-averse than rich countries. Recent comparative findings with students, however, suggest the opposite, giving rise to a risk-income paradox. This paper tests this paradox by measuring the risk preferences of more than 500 household heads spread over the highlands of Ethiopia and finds high degrees of risk tolerance. The paper also finds risk tolerance to increase in income proxies, thus completing the paradox. Using exogenous proxies, the paper concludes that part of the causality must run from income to risk tolerance. The findings suggest that risk preferences cannot be blamed for the failure to adopt new technologies. Alternative explanations are discussed. 2015-01-07T21:20:34Z 2015-01-07T21:20:34Z 2014-12 http://documents.worldbank.org/curated/en/2014/12/23026054/measuring-risk-preferences-rural-ethiopia-risk-tolerance-exogenous-income-proxies http://hdl.handle.net/10986/21135 English en_US Policy Research Working Paper;No. 7137 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Group, Washington, DC Publications & Research :: Policy Research Working Paper Africa Ethiopia |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
APPLICATIONS CATASTROPHIC EVENTS CLASSICAL ECONOMICS CORRELATION ANALYSIS CORRELATIONS DATA QUALITY DECISION MAKING DECISION THEORY DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC CONDITIONS ECONOMIC GROWTH ECONOMIC IMPLICATIONS ECONOMIC THEORY EXPECTED UTILITY EXPECTED VALUE EXPERIMENTAL DATA EXPERIMENTAL ECONOMICS FAMINE FARMERS FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH THEORY HUMAN CAPITAL HYPOTHESES INCENTIVE EFFECTS INCOME INCOME MEASURES INDEPENDENT VARIABLES INSTRUMENTAL VARIABLES INSURANCE INVESTIGATIONS LOTTERIES LOTTERY LOW TRUST MARGINAL UTILITY MATRIX MAXIMUM LIKELIHOOD ESTIMATION MEDICINE NEUTRALITY OPTIMIZATION POLITICAL ECONOMY POOR FARMERS PROBABILITIES PROBABILITY PRODUCTIVITY PROGRAMS PURCHASING POWER RANDOMIZATION RATES REGRESSION ANALYSIS RISK AVERSE RISK AVERSION RISK EXPOSURE RISK MANAGEMENT RISK NEUTRAL RISK PREMIUM STANDARD ERRORS STARVATION STATA STRUCTURAL MODELING UTILITY FUNCTION UTILITY FUNCTIONS UTILITY THEORY VALIDITY WEALTH WORLD HEALTH ORGANIZATION |
| spellingShingle |
APPLICATIONS CATASTROPHIC EVENTS CLASSICAL ECONOMICS CORRELATION ANALYSIS CORRELATIONS DATA QUALITY DECISION MAKING DECISION THEORY DEVELOPMENT ECONOMICS DEVELOPMENT POLICY ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC CONDITIONS ECONOMIC GROWTH ECONOMIC IMPLICATIONS ECONOMIC THEORY EXPECTED UTILITY EXPECTED VALUE EXPERIMENTAL DATA EXPERIMENTAL ECONOMICS FAMINE FARMERS FUNCTIONAL FORMS GDP GDP PER CAPITA GROWTH THEORY HUMAN CAPITAL HYPOTHESES INCENTIVE EFFECTS INCOME INCOME MEASURES INDEPENDENT VARIABLES INSTRUMENTAL VARIABLES INSURANCE INVESTIGATIONS LOTTERIES LOTTERY LOW TRUST MARGINAL UTILITY MATRIX MAXIMUM LIKELIHOOD ESTIMATION MEDICINE NEUTRALITY OPTIMIZATION POLITICAL ECONOMY POOR FARMERS PROBABILITIES PROBABILITY PRODUCTIVITY PROGRAMS PURCHASING POWER RANDOMIZATION RATES REGRESSION ANALYSIS RISK AVERSE RISK AVERSION RISK EXPOSURE RISK MANAGEMENT RISK NEUTRAL RISK PREMIUM STANDARD ERRORS STARVATION STATA STRUCTURAL MODELING UTILITY FUNCTION UTILITY FUNCTIONS UTILITY THEORY VALIDITY WEALTH WORLD HEALTH ORGANIZATION Vieider, Ferdinand M. Beyene, Abebe Bluffstone, Randall Dissanayake, Sahan Gebreegziabher, Zenebe Martinsson, Peter Mekonnen, Alemu Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| geographic_facet |
Africa Ethiopia |
| relation |
Policy Research Working Paper;No. 7137 |
| description |
Risk-aversion has generally been found
to decrease in income. This may lead one to expect that poor
countries will be more risk-averse than rich countries.
Recent comparative findings with students, however, suggest
the opposite, giving rise to a risk-income paradox. This
paper tests this paradox by measuring the risk preferences
of more than 500 household heads spread over the highlands
of Ethiopia and finds high degrees of risk tolerance. The
paper also finds risk tolerance to increase in income
proxies, thus completing the paradox. Using exogenous
proxies, the paper concludes that part of the causality must
run from income to risk tolerance. The findings suggest that
risk preferences cannot be blamed for the failure to adopt
new technologies. Alternative explanations are discussed. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Vieider, Ferdinand M. Beyene, Abebe Bluffstone, Randall Dissanayake, Sahan Gebreegziabher, Zenebe Martinsson, Peter Mekonnen, Alemu |
| author_facet |
Vieider, Ferdinand M. Beyene, Abebe Bluffstone, Randall Dissanayake, Sahan Gebreegziabher, Zenebe Martinsson, Peter Mekonnen, Alemu |
| author_sort |
Vieider, Ferdinand M. |
| title |
Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| title_short |
Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| title_full |
Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| title_fullStr |
Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| title_full_unstemmed |
Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies |
| title_sort |
measuring risk preferences in rural ethiopia : risk tolerance and exogenous income proxies |
| publisher |
World Bank Group, Washington, DC |
| publishDate |
2015 |
| url |
http://documents.worldbank.org/curated/en/2014/12/23026054/measuring-risk-preferences-rural-ethiopia-risk-tolerance-exogenous-income-proxies http://hdl.handle.net/10986/21135 |
| _version_ |
1764447740129968128 |