Consumption Discount Rates, Risk Aversion and Wealth in Low-Income Countries: Evidence from a Field Experiment in Rural Ethiopia

Authors

Mahmud Yesuf, American University
Randall Bluffstone, Portland State UniversityFollow

Published In

Journal of African Economies

Document Type

Citation

Publication Date

1-2019

Abstract

It has been argued that people in low-income countries often have high consumption discount rates (CDRs), which contributes to under-investment in capital, such as education and soil conservation. We use a field experiment to estimate CDRs in rural Ethiopia and find that annual rates range from 43% to 106%. We evaluate whether household wealth affects CDRs and test for synergies with field experiment-derived estimates of risk aversion. We find evidence that respondents who are part of wealthier households have lower CDRs and more risk averse respondents have higher rates.

Description

© The Author(s) 2018. Published by Oxford University Press on behalf of the Centre for the Study of African Economies, all rights reserved.

Locate the Document

http://doi.org/10.1093/jae/ejy010

DOI

10.1093/jae/ejy010

Persistent Identifier

https://archives.pdx.edu/ds/psu/28787

Citation Details

Yesuf, M., & Bluffstone, R. (2019). Consumption Discount Rates, Risk Aversion and Wealth in Low-Income Countries: Evidence from a Field Experiment in Rural Ethiopia. Journal of African Economies, 28(1), 18-38.