Contrasting income shocks with asset shocks: livestock sales in northern Kenya

Abstract

The literature on risk management in agrarian economies has predominantly focusedon the use of assets to buffer consumption against income shocks. However, house-holds in certain low-income, high-risk environments confront asset as well as incomeshocks. This study investigates livestock sales behavior in an environment where bothincome and asset shocks occur. The nature of each type of shock is analyzed, and theirrespective impact on sales behavior is identified. Results indicate income and assetshocks are positively correlated, but influence sales in an offsetting fashion. Thisprovides a possible explanation for the limited empirical support found by previousstudies investigating the role of livestock sales in buffering consumption. Marketingand savings institutions that reduce vulnerability to asset shocks in addition to incomeshocks offer the potential to reduce household risk exposure.