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Wiley InterScience | |||
  The Economic JournalVolume 114 Issue 498, Pages 750 - 777 Published Online: 28 Sep 2004 Journal compilation © 2010 by the Royal Economic Society (Registered Charity No. 231508) Published on behalf of the Royal Economic Society
Abstract | References | Full Text: HTML, PDF (Size: 249K) | Related Articles | Citation Tracking  Stochastic wealth dynamics and risk management among a poor population* * The first two authors share seniority of authorship. We thank the government of Ethiopia for research clearance, the International Livestock Research Institute (ILRI) for hospitality, Dr. Simeon Ehui of ILRI for supervisory assistance, and J.S. Butler, the late Jim Ellis, Garth Holloway, Peter Little, Nancy McCarthy, John McPeak, Gerard van den Berg, an anonymous referee and seminar audiences at Binghamton, Cornell and the annual meetings of the American Agricultural Economics Association for very helpful comments on an earlier version, entitled 'Pastoral Risk and Wealth-Differentiated Herd Accumulation in Southern Ethiopia'. This work was supported by the Pastoral Risk Management Project of the Global Livestock Collaborative Research Support Program, funded by the Office of Agriculture and Food Security, Global Bureau, United States Agency for International Development, under grants DAN-1328-G-00-0046-00 and PCE-G-98-00036-00, by Utah State University, ILRI and through an African Dissertation Fellowship Award from the Rockefeller Foundation. The opinions expressed do not necessarily reflect the views of the US Agency for International Development. Copyright 2004 Royal Economic Society ABSTRACTWe use herd history data collected among pastoralists in southern Ethiopia to study stochastic wealth dynamics among a poor population. Although covariate rainfall shocks plainly matter, household-specific factors, including own herd size, account for most observed variability in wealth dynamics. We find no support for the tragedy of the commons hypothesis. Past studies may have conflated costly self-insurance with stocking rate externalities. Biophysical shocks move households between multiple dynamic wealth equilibria – the lowest suggesting a poverty trap – according to nonconvex path dynamics. These findings have broad implications for development and relief strategies among a poor population vulnerable to climatic shocks. Date of receipt of first submission: August 2001 Date of receipt of final typescript: January 2004 | 
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