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Disentangling Poor Smallholder Farmers’ Risk Preferences and Time Horizons: Evidence from a Field Experiment in Ethiopia

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  • Molla Alemayehu

    (Radboud University Nijmegen)

  • Joost Beuving

    (Radboud University Nijmegen)

  • Ruerd Ruben

    (Wageningen University and Research)

Abstract

This paper considers the economic behaviour of smallholder farmers in eastern Ethiopia and its effects on their poverty status, looking specifically at how farmers deal with production risk and various time horizons. Earlier studies in rural Africa suggested that these are interlinked but that remains analytically unsatisfactory. Through experiments, we seek to disentangle risk preferences and time horizons regarding their impact on poverty. We find that the studied farmers are highly risk-averse and time-impatient; few farmers make longer-term investments. This appears to be covariant with wealth and household indicators, with poorer, less-educated farmers with smaller landholdings making less risky investments, thus yielding smaller returns, which shorten their time horizons. This finding is relevant for rural development policies, in particular suggesting how untying the Gordian knot of risk and time that reproduces rural poverty depends on the simultaneous operation of market and state forces.

Suggested Citation

  • Molla Alemayehu & Joost Beuving & Ruerd Ruben, 2019. "Disentangling Poor Smallholder Farmers’ Risk Preferences and Time Horizons: Evidence from a Field Experiment in Ethiopia," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 31(3), pages 558-580, July.
    • Handle: RePEc:pal:eurjdr:v:31:y:2019:i:3:d:10.1057_s41287-018-0168-x
    DOI: 10.1057/s41287-018-0168-x
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