An economic analysis of farmers' risk attitudes and farm households' responses to rainfall risk in Tigray Northern Ethiopia

N. Haile Abraha

Research output: Thesisinternal PhD, WU

Abstract

Keywords: rainfall risk, ex-ante risk management, ex-post risk coping strategies, off-farm labor supply, fertilizer adoption, Northern Ethiopia, Tigray.   Rural households in semi-arid areas often experience rainfall-related shocks that result in low and uncertain income. Household’s survival depends on the ability to anticipate and to cope with this uncertain income. Through time, households have developed ex-ante risk management and ex-post risk coping strategies. These include crop portfolio adjustments and off-farm activity diversification. This thesis investigates the role of rainfall and rainfall risk on households’ risk management and risk coping strategies. Econometric models based on the neo-classical household production and consumption model were used. These methods were applied to a four-year (1996, 1997, 2001, and 2002) panel data sample of Tigray (Northern Ethiopia) farm households. The study showed that farmers’ ex-ante strategic response to rainfall risk is through diversification of crops to be grown. Choosing the crops most suited to specific rainfall conditions was proven to be a strategy of farmers to cope with unpredictable rainfall. In times of low rainfall, the dominant crops to be chosen are teff and grass pea. Rainfall risk also increases the probability of off-farm labor supply. Therefore, households’ off-farm labor supply can be seen as an ex-ante and ex-post income smoothing strategy. Moreover, this study showed that ex-post consumption variability and rainfall risk negatively correlated with ex-ante fertilizer adoption decisions. This implies that households are biased toward technologies that are less risky. This leads to the conclusion that any mechanism that allows farmers to smooth consumption ex-post will raise ex-ante fertilizer adoption. Ex-ante crop choice, fertilizer adoption, and reliable water availability for farming can be viewed as complements. These complementarities suggest that policies that focus on rainwater harvesting techniques and promoting small-scale irrigation would promote fertilizer adoption. Reducing rainfall-induced risk leads to more fertilizer use, and therefore, to more production and income. Expansion of off-farm employment opportunities inside and outside agriculture would also improve households’ risk management and risk coping capacities.    
Original languageEnglish
QualificationDoctor of Philosophy
Awarding Institution
  • Wageningen University
Supervisors/Advisors
  • Oskam, Arie, Promotor
  • Peerlings, Jack, Co-promotor
  • Woldehanna, Tassew, Co-promotor
Award date22 Oct 2007
Place of Publication[S.l.]
Print ISBNs9789085047254
Publication statusPublished - 2007

Keywords

  • rural development
  • economic development
  • risk
  • economic analysis
  • agricultural households
  • farms
  • off-farm employment
  • fertilizers
  • rain
  • farmers' attitudes
  • decision making
  • Ethiopia
  • development economics
  • risk management
  • fertilizer application

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