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Measuring Risk Preferences in Rural Ethiopia : Risk Tolerance and Exogenous Income Proxies / Vieider, Ferdinand M.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Vieider, Ferdinand M.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Development.
- Economic Theory & Research.
- Experimental Methodology.
- Finance and Financial Sector Development.
- Hazard Risk Management.
- Insurance & Risk Mitigation.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Risk Preferences.
- Science and Technology Development.
- Social Protections and Labor.
- Statistical & Mathematical Sciences.
- Urban Development.
- Local Subjects:
- Development.
- Economic Theory & Research.
- Experimental Methodology.
- Finance and Financial Sector Development.
- Hazard Risk Management.
- Insurance & Risk Mitigation.
- Labor Policies.
- Macroeconomics and Economic Growth.
- Risk Preferences.
- Science and Technology Development.
- Social Protections and Labor.
- Statistical & Mathematical Sciences.
- Urban Development.
- Physical Description:
- 1 online resource (37 pages)
- Other Title:
- Measuring Risk Preferences in Rural Ethiopia
- Place of Publication:
- Washington, D.C., The World Bank, 2014
- System Details:
- data file
- Summary:
- Risk-aversion has generally been found to decrease in income. This may lead one to expect that poor countries will be more risk-averse than rich countries. Recent comparative findings with students, however, suggest the opposite, giving rise to a risk-income paradox. This paper tests this paradox by measuring the risk preferences of more than 500 household heads spread over the highlands of Ethiopia and finds high degrees of risk tolerance. The paper also finds risk tolerance to increase in income proxies, thus completing the paradox. Using exogenous proxies, the paper concludes that part of the causality must run from income to risk tolerance. The findings suggest that risk preferences cannot be blamed for the failure to adopt new technologies. Alternative explanations are discussed.
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