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Can Informal Traditional Institutions Mediate Risk Preferences among Smallholder Farmers? - Evidence from Rural Ethiopia -
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 Title & Authors
Can Informal Traditional Institutions Mediate Risk Preferences among Smallholder Farmers? - Evidence from Rural Ethiopia -
Jang, Dooseok; Atkinson, Joel; Park, Kihong;
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This paper assesses the role of informal institutions in determining risk preference among smallholders in Tigray, Ethiopia. We use data from a household survey conducted by the Institute of Poverty Alleviation and International Development (IPAID). We find that households which participate in Debo, an informal labor-sharing institution, or have a friend from whom they can receive help are less likely to be risk-averse. However, participation in Iddir, a traditional form of insurance, is not significantly associated with risk preference. Hence, the existence of social institutions that provide assistance and social connections through reciprocity may be affording security against risk beyond that brought by more monetary forms of insurance. Given the importance of risk attitude in mediating the adoption of improved agricultural production, a policy suggestion is to provide selected aid to households which are less risk-averse agricultural investors. Also, Debo as a labor-sharing institution may serve as a nexus for managing aid and knowledge sharing.
Ethiopia;social capital;risk preference;millennium village;
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