Abstract
AbstractWe analyze how individual risk aversion changes in response to shocks in an agrarian setting, and the role of changes in yields and prices as two potential channels. To do so we specify a theoretical model that describes temporal alterations in risk aversion. Empirically, we test the model's proposition by combining individual‐level panel data with historical rainfall data for rural Thailand and Vietnam. We find that rainfall shocks increase individuals risk aversion, whereby the largest effects are observed among households that are net buyers of food commodities. Regarding potential channels, only prices seem to explain–and even then just to a very small extent–the increase in net buyers' risk aversion. Our findings imply that shocks can increase risk aversion, and, in the absence of functioning credit and insurance markets, may ultimately lead to decisions that perpetuate poverty.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
