Does Market Experience Attenuate Risk Aversion? Evidence from Landed Farm Households in Ethiopia

Risk preferences are important drivers of many relevant economic decisions of farm households. High risk aversion is a well-known trigger of "poverty traps" for farm households in developing countries. This paper analyzes the effect of market experience on risk aversion for a relatively large sample of landed farm households characterized by historically low mobility in Ethiopia. We measure risk aversion using lab-in-field experimental data, and relate it to actual market experience of household heads. We use an instrumental variable approach to address the issue of endogeneity due to possible self-selection into trade. We find that market experience attenuates risk aversion--farm households with greater market experience are more risk tolerant. Results are robust to using several alternative specifications, controlling for internal mobility, out-migration and other potential unobservables, and for violations to rational choice. Overall, this study provides strong empirical evidence that risk preferences endogenously change as a result of market experience, and can help design policies aiming to increase the productivity and efficiency of farm households.</p

The Plus in Credit-Plus-Technical Assistance:Evidence from a Rural Microcredit Programme in Bolivia

Microfinance institutions traditionally focus on the provision of credit and other financial services. In light of recent evidence on the scant transformative effects of ‘standard’ microcredit models, however, some lenders are increasing efforts to offer additional non-financial services – such as business trainings and technical assistance. While literature on the effects of business trainings is quite voluminous, far less attention has been paid to microcredit in combination with technical assistance, especially salient in rural contexts. This study investigates a programme launched by Sembrar Sartawi, a Bolivian MFI, which complemented dairy farming credit with the provision of agronomic and veterinarian expertise. We collect data of approximately 600 dairy farmers from the Bolivian plateau over two data-collection waves, and conduct a variety of cross-sectional and panel regression analyses. We find that technical assistance has positive, statistically significant, and economically salient impacts on monthly revenues and milk production. Our study strongly suggests that providing access to technical assistance can be a very effective ‘plus’ instrument for MFIs providing financial services to rural clients. We also point at the importance of conducting further research related to cost-effectiveness, to assess whether MFIs may expand technical assistance and at the same time achieve self-sustainability

Does bundling crop insurance with certified seeds crowd-in investments? Experimental evidence from Kenya

We use a randomised experiment in Kenya to analyse how smallholder farmers respond to receiving a free hybrid crop insurance product, conditional on purchasing certified seeds. We find that farmers increase effort—increasing total investments and taking more land in production. In addition to adopting more certified seeds, they also invest more in complementary inputs such as fertilizer and hired-in farm-machinery and non-farm labour. We find limited evidence of a change in farming intensity. For example, there is no evidence of ‘crowding-out’ of effort or inputs on a per-hectare basis, even if the indemnity-based component of the insurance product potentially gives rise to asymmetric information problems (moral hazard). We also document that ex post willingness to pay for the insurance product has increased for the treatment group. This suggests that learning about the benefits of (subsidized) insurance outweighs any anchoring effects on the zero price during the pilot study

The Structure of the Small Dark Cloud CB 107

This paper presents the near-IR imaging observations of CB 107, a small dark globule projected against a rich stellar background. By means of accurate photometry, the near-IR two-color diagram J - H versus H - K was obtained for the stellar background. This information was used to estimate the color excesses of the detected stars so that, given the reddening curve, it was possible to derive the extinction map of the cloud. The structural properties of the dark globule were investigated by plotting the extinction dispersion σ, obtained in a given spatial box, as a function of the mean extinction AV. This relationship has shown quite a definite linear behavior, with the slope increasing with the box size. The results of the present analysis, compared with those obtained by other authors on larger dark clouds, suggest that for a given spatial scale the slope of the σ versus AV relation is greater in CB 107 than in larger clouds. The so-called Δ-variance method was also used to investigate the structure of the dark globule by evaluating the drift behavior of its extinction map. In this way, we have found that the power spectrum of the extinction map is characterized by a power law with exponent β ~ 2.7. This value is lower than expected, for the same range of spatial scales, on the basis of previous work on large molecular clouds

Tavola Rotonda

Fedeli, Bortolotto, Sannazaro, Ghedini, Slavazzi, Cecchi, Gasparol