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An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia

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  • Bellemare, Marc F.
  • Barrett, Christopher B.

Abstract

Do rural households in developing countries make market participation and volume decisions simultaneously or sequentially? This article develops a two-stage econometric model that allows testing between these two competing hypotheses regarding household-level market behavior. The first stage models the household's choice of whether to be a net buyer, autarkic, or a net seller in the market. The second stage models the quantity bought (sold) for net buyers (sellers) based on observable household characteristics. Using household data from Kenya and Ethiopia on livestock markets, we find evidence in favor of sequential decision-making, the welfare implications of which we discuss.

Suggested Citation

  • Bellemare, Marc F. & Barrett, Christopher B., 2005. "An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia," Working Papers 14748, Cornell University, Department of Applied Economics and Management.
    • Handle: RePEc:ags:cudawp:14748
    DOI: 10.22004/ag.econ.14748
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    References listed on IDEAS

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