Work

Stochastic Wealth Dynamics and Risk Management among a Poor Population

Year: 2004

Type: article

Abstract: We use herd history data collected among pastoralists in southern Ethiopia to study stochastic wealth dynamics among a poor population. Although covariate rainfall shocks plainly matter, household‐specific factors, including own herd size, account for most observed variability in wealth dynamics. We find no support for the tragedy of the commons hypothesis. Past studies may have conflated costly self‐insurance with stocking rate externalities. Biophysical shocks move households between multiple dynamic wealth equilibria – the lowest suggesting a poverty trap – according to nonconvex path dynamics. These findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks.

Source: The Economic Journal

DOI: 10.1111/j.1468-0297.2004.00242.x

Authors: Travis J. Lybbert, Christopher B. Barrett, Solomon Desta, D. Layne Coppock

Institutions: Cornell University, Utah State University

Language: English

Topic: Agricultural risk and resilience

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: No poverty

Open Access status: green

Funders: United States Agency for International Development, Rockefeller Foundation, Utah State University