Consumption risk, technology adoption and poverty traps

By Stefan Dercon, L. Christiaensen. 2007

1,053 citations recorded by the source corpus.

Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented: the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just exante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertiliser. The lack of insurance causes inefficiency in production choices.

Subfields: Economics and Econometrics, Safety Research, Soil Science

View Paper: https://www.semanticscholar.org/paper/e16538328b9443f9e5fe48482b63ee6869fe83d5

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Citations in the corpus

The Economics of Poverty Traps and Persistent Poverty: Empirical and Policy Implications (2013, background): “Lack of insurance and credit routinely trap poor households in low return, lower risk technologies, thereby perpetuating poverty (Dercon & Christiaensen, 2011).”
Rural Poverty (2009, methodology): “Land is typically not highly unequally distributed in most African countries, where there is relatively low landlessness and where, in some countries, such as Ethiopia, there is a remarkably equal land distribution.”
Measuring risk attitudes among Mozambican farmers (2014, background): “Dercon and Christiaensen (2011) explicitly show that Ethiopian farmers are constrained in technology adoption by risk.”
Social Networks and the Decision to Insure (2015, methodology): “To overcome this difficulty, experimental approaches were used by Duflo and Saez (2003), Duflo et al. (2008), Dupas (2010), Kremer and Miguel (2007), Kling et al. (2007), Kremer and Levy (2008), and Oster and Thornton (Forthcoming), etc. Non-experimental methods were used notably by Bandiera and Ras”
Understanding the Process of Agricultural Technology Adoption: Mineral Fertilizer in Eastern DR Congo (2014, neutral): “In studies on the adoption of new rice varieties in Cote d’Ivoire and Ghana, Diagne and Demont (2007), and Asuming-Brempong et al.”
Climate risk management and rural poverty reduction (2018, background): “These ex-ante, precautionary strategies include selection of less risky but less profitable crops and cultivars, shifting household labor to off-farm activities, and avoiding borrowing and investment in productive assets (including soil fertility) and improved production technology (Barrett et al., ”
Agriculture and Development: A Brief Review of the Literature (2011, positive): “Dercon and Christiaensen (2007) show that downward consumption risk due to harvest failure reduces the adoption of fertilizers by farmers in Ethiopia.”