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