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Rain and impatience: Evidence from rural Ethiopia

Journal article
Authors S. Di Falco
P. Berck
M. Bezabih
Gunnar Köhlin
Published in Journal of Economic Behavior and Organization
Volume 160
Pages 40-51
ISSN 0167-2681
Publication year 2019
Published at Department of Economics
Pages 40-51
Language en
Links dx.doi.org/10.1016/j.jebo.2019.02.0...
Keywords Ethiopia, Impatience, Rainfall anomalies, Subjective discount rates
Subject categories Economics and Business

Abstract

We have combined farm household panel data, weather data and discount rates, as measured by a hypothetical survey question, to estimate the impact of income on discounting. This paper has found that income variation driven by anomalies in rainfall during the main growing season is a strong predictor of farmers’ subjective discount rates. Farmers prefer a smaller immediate reward to a larger deferred one when affected by negative income shocks, while they display lower discount rates when the income shocks are positive. We have also found that higher discount rates are negatively correlated with profitable agricultural investments. © 2019 Elsevier B.V.

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Utskriftsdatum: 2019-12-07