sequential labor decisions under uncertainty an estimable household model of west african farmers this paper reports estimates of the structural parameters of a stochastic control model that describcs the labor decisions of small farmers in burkina faso west africa the focus of the estimation is on measuring flexibility in production and intertemporal substitutability in consumption full information maximum likelihood estimates of the primitive parameters of the model are computed even though optimal labor decision rules cannot be derived analytically vuong s non nested model specification test shows that this method yields parameter estimates that are superior to those derived by assuming that farmers solve a deterministic control problem the low levels of agricultural labor effort commonly observed in the survey area are shown to be a consequence both of the low productivity of labor in archaic rainfed agriculture and of farmers awareness that in the absence of a labor market overly ambitious production plans lead to seasonal manpower constraints to meet rainfed farmers concerns agricultural research institutes and extension services should factor flexibility into their research agendas

are impatient farmers more risk averse evidence from a lab in the field experiment in rural uganda based on data from a field experiment in rural uganda we show that impatient farmers are more risk averse than patient farmers we relied on a simplified version of the convex time budget ctb method to elicit farmers time preferences and on an independent method for eliciting their risk preferences we report two important findings first we show that our simplified ctb method applied to farmers from uganda replicates the key findings of andreoni and sprenger s lab experiments that involved student subjects second we establish the existence of a negative correlation between risk tolerance and impatience based on two independent measures

investment and upgrade in distributed generation under uncertainty the ongoing deregulation of electricity industries worldwide is providing incentives for microgrids to use small scale distributed generation dg and combined heat and power chp applications via heat exchangers hxs to meet local energy loads although the electric only efficiency of dg is lower than that of central station production relatively high tariff rates and the potential for chp applications increase the attraction of on site generation nevertheless a microgrid contemplating the installation of gas fired dg has to be aware of the uncertainty in the natural gas price treatment of uncertainty via real options increases the value of the investment opportunity which then delays the adoption decision as the opportunity cost of exercising the investment option increases as well in this paper we take the perspective of a microgrid that can proceed in a sequential manner with dg capacity and hx investment in order to reduce its exposure to risk from natural gas price volatility in particular with the availability of the hx the microgrid faces a tradeoff between reducing its exposure to the natural gas price and maximising its cost savings by varying the volatility parameter we find that the microgrid prefers a direct investment strategy for low levels of volatility and a sequential one for higher levels of volatility

liquidity risk and occupational choices we explore which financial constraints matter the most in the choice of becoming an entrepreneur we consider a randomly assigned welfare program in rural mexico and show that cash transfers signi cantly increase entry into entrepreneurship we then exploit the cross household variation in the timing of these transfers and find that current occupational choices are significantly more responsive to the transfers expected for the future than to those currently received guided by a simple occupational choice model we argue that the program has promoted entrepreneurship by enhancing the willingness to bear risk as opposed to simply relaxing current liquidity constraints

welfare improving vertical separation with network externality considering the interplay between network externalities and the degree of product substitutability in a vertical structure we compare the outcomes of vertical integration and vertical separation in contrast to previous results we show that when both products are sufficiently close substitutes there is a threshold level of the network externality parameter beyond which vertical separation is more efficient than vertical integration this is due to the internalization of the network externality by a multiproduct monopolist which in the balance between the extensive and intensive margin leads to higher output prices

effects of household shocks on risk preferences and loss aversion evidence from upland smallholders of south east asia avoiding risk in financial decisions is credited to be a key contributor to persistent poverty and poverty traps in spite of this the methods used to measure behaviour under risk rarely reflect a

remittances banking status and the usage of insurance schemes empirical evidence that migrants send home more remittances after disasters raises the question of whether remittances can be used to self insure substituting for both formal and informal insurance we investigate this question using a unique data set on the usage patterns of financial services by households in south africa we show that the likelihood that a respondent has a formal funeral cover increases with income and banking status however it is lower for individuals receiving remittances which supports the idea that remittances act as self insurance we also show that purchasing formal funeral cover is influenced by other risk management strategies and that determinants of informal insurance differ from those of formal insurance jel code d14 f24 g22 o16

understanding the process of agricultural technology adoption mineral fertilizer in eastern dr congo summary we analyze the adoption of mineral fertilizer in south kivu we model technology adoption as a three step process including awareness tryout and adoption and empirically analyze these steps using cross sectional farm household data and bivariate and heckman selection probit models we find that awareness about fertilizer is high 57 and mainly determined by education and social capital tryout is low 13 of aware farmers but positively influenced by extension interventions continued adoption is high 70 of tryout farmers but capital constraints are important and not all extension interventions are effective for continued adoption our results entail implications for extension policies in poor areas

platform competition in two sided markets many if not most markets with network externalities are two sided to succeed platforms in industries such as software portals and media payment systems and the internet must get both sides of the market on board accordingly platforms devote much attention to their business model that is to how they court each side while making money overall this paper builds a model of platform competition with two sided markets it unveils the determinants of price allocation and end user surplus for different governance structures profit maximizing platforms and not for profit joint undertakings and compares the outcomes with those under an integrated monopolist and a ramsey planner jel l5 l82 l86 l96

agriculture in africa telling myths from facts a synthesis stylized facts drive research agendas and policy debates yet robust stylized facts are hard to come by and when available often outdated in a special issue of food policy 12 papers revisit conventional wisdom on african agriculture and its farmers livelihoods using nationally representative surveys from the living standards measurement study integrated surveys on agriculture initiative in six african countries at times the findings simply confirm the common understanding of the topic but the studies also throw up several surprises redirecting some policy debates while fine tuning others overall the project calls for more attention to checking and updating the common wisdom this requires nationally representative data and sufficient incentives among researchers and policy makers alike without well grounded stylized facts they can easily be profoundly misguided

an employment guarantee as risk insurance assessing the effects of the nregs on agricultural production decisions uninsured risk constrains households in their production decisions in many developing countries similarly to crop insurance employment guarantees can support farmers in managing agricultural production risks evidence from representative panel data of andhra pradesh india suggests that the national rural employment guarantee scheme nregs reduces households uncertainty about future income streams because it provides employment opportunities in rural areas independently of weather shocks and crop failure because the nregs makes an ex post labor supply response to agricultural shocks more efficient households with access to the nregs can shift their production towards riskier but also more profitable crops the observed shifts in agricultural production do considerably raise the profitability of agricultural production and hence the incomes of smallholder farmers the findings are not driven by changes in the labor or cost intensity of those crops which supports the idea that the causal mechanism underlying the observed changes is indeed an insurance effect

adoption of agricultural innovations in developing countries a survey this paper reviews various studies which have provided a description and possible explanation to patterns of innovation adoption in the agricultural sector the survey points out that the tendency of many studies to consider innovation adoption in dichotomous terms adoption nonadoption may not be appropriate in many cases where the actual decisions are defined over a more continuous range more attention needs to be given to the socio cultural and institutional environment in area studies so that their interrelation with economic factors affecting adoption can be inferred the presence of several interrelated innovations is another aspect that needs to be considered more carefully in future research since a number of simultaneous decisions may be involved furthermore the possibility of regular sequential patterns in adopting components of a new technological package should be specifically addressed in future studies finally the impact of differential adoption rates on land holding distribution merits attention in future research

optimal technology choice and investment timing a stochastic model of industrial cogeneration vs heat only production abstract in this paper we develop an economic model that explains the decision making problem under uncertainty of an industrial firm that wants to invest in a process technology more specifically the decision is between making an irreversible investment in a combined heat and power production cogeneration system or to invest in a conventional heat only generation system steam boiler and to purchase all electricity from the grid in our model we include the main economic and technical variables of the investment decision process we also account for the risk and uncertainty inherent in volatile energy prices that can greatly affect the valuation of the investment project the dynamic stochastic model presented allows us to simultaneously determine the optimal technology choice and investment timing we apply the theoretical model and illustrate our main findings with a numerical example that is based on realistic cost values for industrial oil or gas fired cogeneration and heat only generation in switzerland we also briefly discuss expected effects of a co 2 tax on the investment decision

measuring exposure to downside risk with an application to thailand and vietnam summary in this paper we propose a new measure of exposure to downside risk its reference point is the current standard of living of a household as opposed to other benchmarks such as the poverty line in the case of measures of vulnerability using panel data from thailand and vietnam we develop an empirical approach to quantify our measure more precisely we predict truly forward looking probabilities and deprivation indices of different states of the world and aggregate them to country specific measures of exposure to downside risk we scrutinize the correlates of these measures in the periods 2007 08 and 2008 09 using regressions with household fixed effects we examine vulnerability to poverty and hybrid vulnerability to poverty in an identical empirical framework this allows us to draw conclusions with respect to the value added of our new measure we find that the measure of exposure to downside risk indeed offers complimentary information that may be relevant from a policy perspective and recommend to incorporate its appraisal in holistic assessments of vulnerability and risk exposure

the role of education on the adoption of chemical fertiliser under different socioeconomic environments in ethiopia studies on input adoption consider education as one of the most important factors that affect adoption decisions however very little is known about the spill over effect of intra household education on the adoption process and about the impact of education on adoption decisions under different socioeconomic conditions we investigate these two issues using a discrete choice model the results indicate that the decision making process is a decentralised one in which educated adult members of the household actively participate in the decision making process this casts doubt on the traditional assumption that the household head is the sole decision maker the results reveal that there is a substantial and statistically significant intra household spill over effect of education on the adoption decision of households the results of the study also show that the coefficient of the education and the environment interaction variable is negative and statistically significant this demonstrates that education and socioeconomic environments could be substitutes in modern environments and complementary in traditional ones this implies that the expansion of education in traditional areas may be more attractive than in modern areas since education is usually the only means to enhance the ability of farmers to acquire synthesise and respond to innovations such as chemical fertiliser

effects of insurance on child labour ex ante and ex post behavioural changes in this paper we analyse possible effects of insurance on child labour first we develop a theoretical model that separates effects of insurance with and without a shock taking place we then empi

the last mile s in modern input distribution pricing profitability and adoption increasing adoption of modern inputs remains one of the best hopes for greater agricultural production in developing countries based on unique data from northwestern ethiopia this study examines the last mile s from the input distribution center to the farmer in the chemical fertilizer and improved seed distribution system we find that increasing transaction and transportation costs over a 35 km distance along a route mainly accessible to only foot traffic lead to a 50 increase of the price of chemical fertilizer and to a 75 reduction in its use farmers who live about 10 km from the distribution center face per unit transaction and transportation costs as high as the costs needed to bring the fertilizer from the international port to the input distribution center about 1 000 km tackling the last mile s costs should thus be a priority to improve modern input adoption and use in these settings

rural finance and agricultural technology adoption in ethiopia does the institutional design of lending organizations matter summary it has now become almost a stylized fact that sustained agricultural growth is central to rapid poverty reduction and economic development yet world poverty is largely concentrated in the agrarian societies which have the potential for agricultural productivity growth this is particularly true for sub saharan african countries where the gaps between potential and actual yields remain high minimizing this gap through the promotion of modern inputs such as fertilizer and modern seeds has been at the core of almost all development strategies in ethiopia among other initiatives the country has promoted microfinance institutions and member owned financial cooperatives to alleviate credit constraints of the smallholder farmers this paper analyzes the impacts of these institutions using household survey data and a propensity score matching technique we examine the effects that institutional financial services have on farmers adoption of agricultural technology in ethiopia the results suggest that access to institutional finance has a significant positive impact on both the adoption and extent of technology use however when impacts are disaggregated by type of financial institution and farm size heterogeneities are observed in particular financial cooperatives have a greater impact on technology adoption than microfinance institutions and the results appear to vary depending on farm size and types of inputs the paper concludes with implications for policies to promote adoption of modern agricultural inputs

insurance market efficiency and crop choices in pakistan this paper tests the efficiency of insurance markets in the pakistan punjab by examining how crop choices are affected by the presence of price and yield risk we estimate reduced form and structural models of crop choices although we cannot reject the hypothesis that village members efficiently share risk among themselves production choices are shown to depend on risk existing risk sharing and selfinsurance mechanisms thus imperfectly protect punjab farmers against village level shocks results also indicate that households respond to consumption price risk thereby suggesting that empirical and theoretical work on risk should avoid putting an exclusive emphasis on yield and output price risk

risk crop choice and savings evidence from tanzania rural households engaged in agricultural activities face considerable risks in their income process these income risks are especially important if they result in consumption fluctuations this is likely if insurance and credit markets are absent one possible strategy for household is to take up low risk activities even if they imply lower returns such response cannot be viewed independently from the other options available to households to reduce consumption fluctuations this paper focuses on the importance of liquid asset formation for risk taking behaviour by households an intertemporal model of consumption under liquidity constraints is developed in which households can choose between income activities with different returns and riskiness it shows that if liquid asset holdings are large providing a buffer for consumption shortfalls then households will be more willing to take up high risk activities evidence based on survey data from shinyanga district tanzania is presented consistent with this prediction this abstract was borrowed from another version of this item

long term impacts of global food crisis on production decisions evidence from farm investments in indonesia did the rise in food prices have a long term impact on agricultural production using household level panel data from seven provinces of indonesia this paper finds that the price shock created a forward looking incentive to invest which can dynamically enhance productivity in agriculture it also finds that the impact of the price shock on investment behavior differs by initial wealth in response to price increases wealthy farmers invested more in productive assets while poor farmers increased their financial savings as well as consumption price spikes relax liquidity constraints which increases investments among the richer while do so savings and consumptions among the poor possibly leading to diverging income inequality in the long run

chicken and egg competition among intermediation service providers we analyze a model of imperfect price competition between intermediation service providers we insist on features that are relevant for informational intermediation via the internet the presence of indirect network externalities the possibility of using the nonexclusive services of several intermediaries and the widespread practice of price discrimination based on users identity and on usage efficient market structures emerge in equilibrium as well as some specific form of inefficient structures intermediaries have incentives to propose non exclusive services as this moderates competition and allows them to exert market power we analyze in detail the pricing and business strategies followed by intermediation services providers copyright 2003 by the rand corporation

crop diversity household welfare and consumption smoothing under risk evidence from rural uganda abstract in the wake of climate change there is now a resurgence of interest in the promotion of crop diversification as a climate smart agricultural practice in sub saharan africa the development economics literature suggests that increasing crop diversity is an effective risk management and consumption smoothing strategy in a context characterized by repeated exposure to shocks but weak institutional innovations using panel survey data from rural uganda merged with historical weather data this paper sheds light on the household welfare and consumption smoothing effects of crop diversity we employ instrumental variables methods to control for unobserved heterogeneity and potential reverse causality our study finds that crop diversification is a welfare enhancing strategy that increases consumption and aggregate household diets instrumental variables quantile regression results show that crop diversification generates higher consumption benefits for poorest households in the lower quantile of the consumption distribution than for relatively richer households crop diversification also improves consumption smoothing through reducing households reliance on less effective strategies such as informal insurance and involuntary diet changes as risk coping mechanisms overall the findings suggest that transforming agriculture towards a more diversified cropping system is a viable pathway for improving diets welfare risk management and the resilience of rural households

network competition ii price discrimination our companion article developed a clear conceptual framework of negotiated or regulated interconnection agreements between rival operators and studied competition between interconnected networks under the assumption of nondiscriminatory pricing this article relaxes this assumption and allows networks to charge different prices for calls terminating on the subscriber s network and those terminating on a rivals network this creates a price differential between services that are identical for the consumer and generates network externalities despite network interconnection we show that in both the mature and entry phases of the industry the nature of competition is substantially affected by such price discrimination

social networks and factor markets panel data evidence from ethiopia we investigate the role of an indigenous social network in ethiopia the iddir in facilitating factor market transactions among smallholder farmers we use detailed longitudinal household survey data and employ fixed effects estimation approaches to identify the effect of iddir membership on factor market transactions among farmers we find that joining an iddir network improves households access to land labour and credit transactions our findings also hint that iddir networks may crowd out borrowing from local moneylenders locally referred as arata abedari a relatively expensive credit source these results suggest that non market institutions can play crucial roles in facilitating market transactions

asset smoothing consumption smoothing and the reproduction of inequality under risk and subsistence constraints abstract a growing literature asks whether low wealth agents can accumulate assets over time or whether they are trapped in poverty this paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource poor environment characterized by risk and subsistence constraints optimal portfolio strategies are found to bifurcate despite divisible assets and fully rational agents wealthier agents acquire a higher yielding portfolio and pursue conventional consumption smoothing poorer agents acquire a less remunerative portfolio and pursue asset smoothing rather than consumption smoothing asset based risk coping thus results in positive correlation between initial wealth and portfolio rate of return

income smoothing and consumption smoothing one way that risk averse households protect consumption levels is to borrow and use insurance mechanisms another way common in low income economies is to diversify economic activities and make conservative production and employment choices households thus tend toward limiting exposure only to shocks that can be handled with available credit and insurance typically both types of mechanisms are studied independently but much more can be learned by studying them together first we obtain a more complete picture of risks costs and insurance possibilities second it opens the way to considering biases in standard tests of credit and insurance

the economics of poverty traps and persistent poverty empirical and policy implications the moral and economic imperatives to intervene in poverty traps motivate the identification of poverty traps and their structural causes so as to inform the design of appropriate policy responses however empirical identification remains challenging because of poverty traps complexity after reviewing mechanisms that can generate poverty traps we focus on one multiple financial market failures emphasising its heretofore underappreciated testable implications including specific behaviours that are rational only in the presence of a poverty trap we therefore recommend tests for these behaviours rather than more econometrically challenged efforts to directly test for poverty traps in estimated asset dynamics

fertilizer use risk and off farm labor markets in the semi arid tropics of india a two period model is developed in which a risk averse farmer uses off farm labor to smooth consumption leading to greater use of fertilizer fertilizer demand is shown to increase with the depth of the off farm labor market controlling for exogenous weather risk farmers use more fertilizer the lower the unemployment rate and the higher the share of nonagricultural work in total off farm labor the results suggest that off farm labor markets and own farm production may be complementary in risky production environments so that policies which promote the depth of the off farm labor market in low income areas may also bolster farm productivity copyright 2003 oxford university press

too certain to invest public safety nets and insurance markets in ethiopia researchers efforts to introduce index insurance in developing countries have met with little demand despite its great potential to help farmers mitigate economic risk i argue that researchers have overlooked institutional context s critical role in the formation of private markets when designing insurance contracts using micro level evidence from ethiopia i show that recipients of a preexisting effective large scale public safety net fail to take up a new highly subsidized private insurance offer government safety net programs can decrease demand for private index insurance forming an additional barrier to index insurance take up a direct implication of this research is that policymakers should design private and public insurance products that account for or even complement each other

a heterogeneous agent model of credit linked index insurance and farm technology adoption abstract protection from downside risk is a determinant of technology uptake among subsistence agricultural households access to credit insurance and savings may stimulate technology adoption where new methods are riskier but higher yielding or require sunk costs in this paper we employ a dynamic stochastic heterogeneous agent model where farm households have access to contingent credit and make savings technology and loan repayment choices our approach is novel as insurance is modeled as a meso level product where the bank is indemnified before any payouts are distributed to borrowers thus it accounts for both supply and demand side concerns showing a flow of effects when index insurance contracts are sold to risk aggregators for whom basis risk is lower results show letting the lender lay first claim on indemnities lowers default which can decrease interest rates and expand credit access insurance and savings may also spur technology uptake

agricultural transformation in africa assessing the evidence in ethiopia summary despite significant efforts africa has struggled to imitate the rapid agricultural growth that took place in asia in the 1960s and 1970s as a rare but important exception ethiopia s agriculture sector recorded remarkable rapid growth during 2004 14 this paper explores this rapid change in the agriculture sector of this important country the second most populous in africa we review the evidence on agricultural growth and decompose the contributions of modern inputs to growth using an adjusted solow decomposition model we also highlight the key pathways ethiopia followed to achieve its agricultural growth we find that land and labor use expanded significantly and total factor productivity grew by about 2 3 per year over the study period moreover modern input use more than doubled explaining some of this growth the expansion in modern input use appears to have been driven by high government expenditures on the agriculture sector including agricultural extension but also by an improved road network higher rural education levels and favorable international and local price incentives

consumption insurance an evaluation of risk bearing systems in low income economies the hypothesis of full risk sharing can be taken to data from low income countries and evaluate formal and informal financial systems in many contexts idiosyncratic risks are high so credit insurance arrangements could be beneficial statistical tests reveal that households in southern india take advantage of these possibilities villages in cote d ivoire and countries in thailand do not do as well the paper includes an empirical description of the devices used to smooth consumption and a theoretical discussion of private information and incentives on ideal operating systems the full information and mechanism design frameworks provide benchmarks for policy analysis

self protection from weather risk using improved maize varieties or off farm income and the propensity for insurance we investigate how self protection from the adoption of improved maize varieties imv and off farm income affects risk premiums for smallholder maize producers in uganda to unbundle these effects we specify the cost of risk to explicitly capture four risk components mean variance skewness and kurtosis using unique plot level panel data for uganda we estimate and test moments of a flexible production function based on an expanded form of the johnson su family distribution and proceed to simulate the degree of responsiveness of risk premiums and welfare estimates to marginal changes in the share of land under imv and off farm income scenarios of joint adoption of imv accompanied with low and high application of inorganic fertilizer and the effect of off farm income when there is high and low supply of farm labor are examined results show that the use of imv and off farm income substantially reduces risk premiums and the individual effect is much higher under low fertilizer application and high supply of farm labor respectively thus implying that self protection is likely to reduce the propensity for index insurance especially if its design fails to consider the reduction in downside risk

wealth weather risk and the composition and profitability of agricultural investments despite the growing evidence that farmers in low income environments are risk averse there has been little empirical evidence on the importance of risk in shaping the actual allocation of production resources among farmers differentiated by wealth the authors use panel data on investments in rural india to examine how the composition of productive and nonproductive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk income variability is a prominent feature of the experience of rural agents in low income countries the authors report evidence based on measures of rainfall variability that the agricultural investment portfolio behavior of farmers in such settings reflects risk aversion due evidently to limitations on consumption soothing mechanisms such as crop insurance or credit markets the authors results suggest that uninsured weather risk is a significant cause of lower efficiency and lower average incomes a one standard deviation decrease in weather risk measured by the standard deviation of the timing of the rainy season would raise average profits by up to 35 percent among farmers in the lowest wealth quartile moreover rainfall variability induces a more unequal distribution of average incomes for a given distribution of wealth wealthier farmers are willing to absorb significant risk without giving up profits to reduce production risk smaller farmers have to invest their limited wealth in ways that reduce their exposure to risk at the cost of lower profit rates the authors found that at high levels of rainfall variability differences in rates of profit per unit of agricultural assets were similar across classes of wealth but over the sample range of rainfall variability these rates of profit were always higher for the poorer farmers than for the wealthier ones suggesting that the disadvantages of small farmers in risk diffusion are more than offset by their labor cost advantage

is informal risk sharing less effective for the poor risk externalities and moral hazard in mutual insurance abstract poor farm households are less keen to adopt high risk high return technologies than rich households yet the poor are more vulnerable to income shocks we develop a model of endogenous risk taking to explain these facts in autarky poor households adopt less risky production plans and obtain lower expected returns but face higher relative risk than the rich the introduction of risk sharing generates negative risk externalities between agents at the first best the social planner imposes a homogeneous level of risk taking in the group at the second best risk taking is not enforceable and increases with insurance generating moral hazard interestingly the poor s risk taking behavior is more sensitive to insurance the social planner thus mitigates risk taking by applying a lower insurance coverage in poor groups the introduction of risk sharing therefore reinforces the gap between rich and poor in terms of expected income and absolute risk while the effect on relative risk is ambiguous

sifting through the weeds understanding heterogeneity in fertilizer and labor response in central malawi abstract despite heavy subsidies provided by the malawian government input use remains low estimated maize response rates to fertilizer vary widely across studies raising questions about the sources of this variability and whether fertilizer is generally profitable for most smallholder farmers at commercial prices this study uses survey and soil data from farmer identified most and least fertile maize plots in central malawi to explain the heterogeneity in maize response to inputs and to determine whether this heterogeneity explains low uptake of commercial fertilizer we estimate maize yield functions to characterize the range of maize response to fertilizer and weeding labor at locations that vary from marginal to mesic environments and show that differences in productivity persist with a plot level fixed effect and are not solely attributable to farmer skill using a range of price scenarios and classifying soil fertility by total organic carbon levels we find that fertilizer is more profitable on low fertility plots while current levels of weeding labor are more likely to be profitable on the high fertility plots the largest variation in profitability occurs between plots rather than price scenarios highlighting the importance of policies to improve soil fertility and address constraints to use of complementary inputs

your network or mine the economics of routing rules in many markets including payment cards and telecommunications service providers operate networks that support customer transactions with each other when the two sides of a transaction belong to more than one network in common the question arises as to which network will carry the transaction we show that the answer depends on a combination of who has the formal authority to choose and the parties network subscription decisions our central finding is that granting formal authority to one side of the market can increase the extent to which transactions run over the network preferred by the other side of the market we also characterize competing networks equilibrium choices of routing rules and prices

adoption of modern varieties farmers welfare and crop biodiversity evidence from uganda abstract this paper assesses the impact of modern varieties adoption on farmers welfare and crop biodiversity conserved in situ using nationally representative data collected in 2009 2010 in uganda an endogenous switching regression model estimates the net economic and environmental effects of switching from local landraces to modern species results show that after controlling for market and agro ecological factors the local varieties perform better than modern ones in marginalized and climatic vulnerable areas crop biodiversity shows to play a fundamental role in farmers risk minimizing strategies when the available modern varieties are not adaptable to the local context and not supported by the required level of agro intensification rural development policies should consider the heterogeneity in the adoption returns and support diversity conservation as a national strategic asset for a suitable bioprospecting and a best fitting agricultural system implementation

how does risk management influence production decisions evidence from a field experiment weather is a key source of income risk especially in emerging market economies this paper uses a randomized controlled trial involving indian farmers to study how an innovative rainfall insurance product affects production decisions the authors find that insurance provision induces farmers to invest more in higher return but rainfall sensitive cash crops particularly among educated farmers this shift in behavior occurs ex ante when realized monsoon rainfall is still uncertain the results suggest that financial innovation can mitigate the real effects of uninsured production risk

el nino or el peso crisis poverty and income distribution in the philippines using household survey data for 1998 the authors assess the distributional impact of the recent economic crisis in the philippines the results suggest that the impact of the crisis was modest leading to a five percent reduction in average living standards and a nine percent increase in the incidence of poverty with larger increases indicated for the depth and severity of poverty the greater shock came from el nino rather than through the labor market the labor market shock was progressive reducing inequality while el nino shock was regressive increasing inequality not all households were equally vulnerable to the crisis induced shocks household and community characteristics affected the impact of the shocks ownership of land made households more susceptible to the el nino shocks higher levels of education made households more vulnerable to wage and employment shocks the impact of the crisis was greater in more commercially developed communities occupational diversity within a household helped mitigate the adverse impact there is some evidence of consumption smoothing by the households affected by the crisis but the poor were less able to protect their consumption which is a matter of policy concern

seeing is believing evidence from an extension network experiment extension is designed to enable lab to farm technology diffusion decentralized models assume that information flows from researchers to extension workers and from extension agents to contact farmers cfs cfs should then train other farmers in their communities such a modality may fail to address informational inefficiencies and accountability issues the authors run a field experiment to measure the impact of augmenting the cf model with a direct cf training on the diffusion of a new technology all villages have cfs and access the same extension network in treatment villages cfs additionally receive a three day central training on the new technology they track information transmission through two nodes of the extension network from extension agents to cfs and from cfs to other farmers directly training cfs leads to a large statistically significant increase in adoption among cfs however higher levels of cf adoption have limited impact on the behavior of other farmers

an economic evaluation of the potential for distributed energy in australia we present here economic findings from a major study by australia s commonwealth scientific and industrial research organisation csiro on the value of distributed energy technologies de collectively demand management energy efficiency and distributed generation for reducing greenhouse gas emissions from australia s energy sector csiro 2009 the study covered potential economic environmental technical social policy and regulatory impacts that could result from their wide scale adoption partial equilibrium modeling of the stationary energy and transport sectors found that australia could achieve a present value welfare gain of around 130 billion when operating under a 450 ppm carbon reduction trajectory through to 2050 modeling also suggests that reduced volatility in the spot market could decrease average prices by up to 12 in 2030 and 65 in 2050 by using local resources to better cater for an evolving supply demand imbalance further modeling suggests that even a small amount of distributed generation located within a distribution network has the potential to significantly alter electricity prices by changing the merit order of dispatch in an electricity spot market changes to the dispatch relative to a base case can have both positive and negative effects on network losses

nonlinear pricing of telecommunications with call and network externalities abstract this paper investigates how call and network externalities affect a monopolist s optimal nonlinear tariff in a two way telecommunication service market where consumers valuations for outgoing and incoming calls are positively correlated and the firm is not allowed to charge incoming calls it is shown that in contrast to the traditional efficiency on the top result all subscribers including those with the highest willingness to pay make suboptimal quantities of calls in the equilibrium the presence of call externalities may result in the existence of no call making subscribers in equilibrium also the firm may have incentives to sell the service below costs to some low valuation consumers in order to take advantage of the effect of network externalities

sequential decision making in production models single equation estimates of production models usually are justified by the assumption that production inputs are chosen as part of a one period decision problem yet most production decisions in agriculture are made sequentially in this paper the farmer s optimal input choices are modeled as optimal controls in a stochastic control problem a two period cobb douglas example is used to show that sequential solutions to production problems may yield models which require either single equation or simultaneous equation estimators functional separability stochastic specification and behavior under uncertainty are discussed in the context of dynamic production models

poverty status and the impact of formal credit on technology use and wellbeing among ethiopian smallholders summary this paper examines the impact of formal credit largely microfinance on the use of improved technology and on consumption and asset growth across households in different degrees of asset poverty using data from rural ethiopia the analysis finds no relationship between participation in microfinance programs and the use of technologies or consumption growth among the poorest households even though the use of certain technologies like fertilizer contributes to their asset accumulation over time for other households microfinance has positive effects on both consumption and asset growth as well as on the use of improved technology the findings imply variation in constraints faced by different classes of poor households and suggest the value of asset based poverty classifications in identifying target groups for poverty interventions

two sided markets a progress report the paper provides a road map to the burgeoning literature on two sided markets and presents new results it identifies two sided markets with markets in which the structure and not only the level of prices charged by platforms matters the failure of the coase theorem is necessary but not sufficient for two sidedness the paper builds a model integrating usage and membership externalities that unifies two hitherto disparate strands of the literature emphasizing either form of externality and obtains new results on the mix of membership and usage charges when price setting or bargaining determine payments between end users

the efficiency of competing vertical chains with network externalities abstract this paper compares vertical integration and vertical separation with network externalities contrary to conventional wisdom if network effects are stronger than the threshold level of the network externality parameter manufacturers strategic choices of wholesale prices move in opposite directions i e wholesale prices may be strategic substitutes under bertrand competition second if the strength of network effects is strong enough both profits and outputs are larger under vertical separation than under integration finally if network effects are strong weak outputs wholesale prices retail prices consumer surplus and social welfare are higher lower under separation than integration

technology diffusion outcome variability and social learning evidence from a field experiment in kenya this article explores the mechanisms through which social learning mediates technology diffusion we exploit an experiment on the dissemination of biochar a soil amendment that can improve fertility on weathered and or degraded soils we find that social networks transmit information about the average benefits of adoption but also its risk and that observed variability inhibits uptake to a greater degree than positive average results engender it paradoxically this relationship is stronger among networks that do not discuss farming but disappears among farmer networks that do this is resolved with a simple model of social learning about conditional rather than unconditional benefit distributions as farmers observe factors associated with outcomes in their networks they constrain the distribution of their own potential outcomes this conditional distribution diverges from the unconditional distribution that the econometrician observes we conclude that social learning is characterized by implicit model building by sophisticated decision makers rather than simple herding towards observed good results

the large scale solar feed in tariff reverse auction in the australian capital territory australia abstract feed in tariffs fits offer renewable energy developers significant investor certainty but sometimes at the cost of being misaligned with generation costs reverse fit auctions where the fit rights for a predetermined capacity are auctioned can overcome this problem but can be plagued by non delivery risks particularly of competitively priced proposals in 2012 and 2013 the australian capital territory act government in australia conducted a fit reverse auction for 40 mw of large scale solar generating capacity the first such auction undertaken in the country the auction was highly competitive in relation to price and demonstrating low delivery risks proposal capital costs particularly engineering procurement and construction costs as well as internal rates of return were lower than expected the auction process revealed limited land availability for large scale solar developments in the act as well as a significant perceived sovereign risk issue the auction process was designed to mitigate non delivery risk by requiring proposals to be pre qualified on the basis of delivery risk before considering fit pricing the scheme is likely to be used by the act government to support further large scale renewable energy development as part of its greenhouse gas reduction strategy which is underpinned by a 90 per cent by 2020 renewable energy target

neighbors and extension agents in ethiopia who matters more for technology adoption improving agricultural productivity is seen as vital to economic growth in poor countries particularly in sub saharan africa where productivity growth has lagged behind that of other continents the focus has therefore been on new technologies particularly the adoption and diffusion of improved seed varieties and the increased use of fertiliser supported by investments in effective extension services it is important to understand how these new technologies spread and the effectiveness of extension services in this process

financing alternative energy projects an examination of challenges and opportunities for local government abstract local government in australia has a strong collective capacity to reduce ghg emissions through policies funding allocation to renewable energy projects and the delivery of programs and services this study examines the institutional capacity of councils in sydney and how this impacts on decisions to invest in alternative energy projects we find greenhouse gas emission targets of councils are strongly aligned to national targets but do not reflect the local council s institutional capacity political leadership or strategic priorities energy reduction projects are often identified and undertaken by environmental staff without support from financial staff or financial evaluation tools an absence of national guidelines to provide consistency in tracking and reporting limits cross sector benchmarking street lighting contributes to a significant proportion of council s total electricity expenditure and ghg emission profile being highly regulated existing contracts and the current practice of street lighting services limits the councils ability to reduce emissions based on our analysis we recommend a number of measures to overcome these constraints including the use of financial evaluation tools for small scale renewable energy projects a standardised national tracking and reporting platform to facilitate progress reporting and meaningful comparative analysis between councils and policy reform to the regulation of street lighting

the magnitude of the impact of a shift from coal to gas under a carbon price we seek to evaluate the extent of the pass through of increased fuel and carbon costs to wholesale prices with a shift of generation from coal fired to gas fired plants modelling of australia s national electricity market in 2035 is undertaken using australian energy market operator assumptions for fuel costs capital costs and demand forecasts an electricity market simulation package plexos which uses deterministic linear programming techniques and transmission and generating plant data is used to optimize the power system and determine the least cost dispatch of generating resources to meet a given demand we find that wholesale market prices increase due to the full pass through of the increased costs of gas over coal as an input fuel and the carbon price in addition we find that wholesale prices increase by more than the pass through of fuel and carbon costs because of the fact that generators can charge infra marginal rents and engage in strategic behaviour to maximize their profits

nonfarm employment agricultural intensification and productivity change empirical findings from uganda this article uses panel data from the living standards measurement study integrated surveys on agriculture for uganda to assess the farm level effects of nonfarm employment on agricultural intensification and productivity change a sample selection model is used to account for both unobserved heterogeneity and potential simultaneity between agricultural production and nonfarm income results show that nonfarm employment can have differential impacts on farm technology intensity and productivity nonfarm income is found to have a positive impact on farm hired labor and improved seed intensity a negative effect on on farm family labor use and no significant impact on fertilizer soil water management and joint use of farm technologies the econometric evidence also indicates that agricultural productivity declines as nonfarm income increases taken together our findings reveal important trade offs between nonfarm employment and income and farm productivity growth under smallholder agriculture the results indicated that targeted policies are required to reduce these potential trade offs between nonfarm employment and agricultural intensification and productivity change

asset based poverty transition and persistence in rural china this article tests empirically for transition and persistence of poverty in rural china based on the theory of asset based poverty traps it proposes an analytical framework mitigating the problem of endogenous switching between accumulation regimes and disentangling the true state dependence of poverty specifically a dynamic asset threshold separating households into downward and upward mobility regimes is identified after taking households unobserved characteristics and observed regime differentiated accumulation strategies into account the static analysis identifies causality running from settling into a downward mobility regime to the probability of poverty measured by consumption furthermore allowing for endogenous initial poverty status the dynamic analysis finds strong true state dependence in poverty households with the same characteristics are nearly twice as likely to be poor as if they had not previously switched to the accumulation regime assets below the dynamic threshold serve as a conduit through which poverty propagates itself factors that help to break this vicious circle are identified

identifying vulnerability to poverty a critical survey in the economic literature on poverty various methods have been proposed for measuring a phenomenon known as vulnerability however after more than a quarter century of research no consensus has been reached on how to identify such vulnerable individuals within a given population some misunderstandings have also arisen from the overlapping of other closely related concepts such as the expectation of being poor expected poverty multi period poverty and risk exposure this paper offers a detailed conceptual discussion on vulnerability to poverty and its related elements reviewing a wide range of identifying criteria provided in the literature it is found that according to the state of the art in this field of research two key elements stand out in identifying vulnerable individuals an expected well being below the poverty line and a relevant risk of falling into poverty due to downside deviation from a reference level of well being the traditional classification of vulnerability approaches has been updated into four groups i those that stress the element of exposure to risk ii those that emphasize the element of expected poverty iii those that define vulnerability through a utility gap and iv those that are supported by a mean risk dominance criterion

vulnerability seasonality and poverty in ethiopia most studies examining the dynamics of welfare have found large fluctuations in consumption over relatively short periods suggesting substantial short run movements in and out of poverty the consequence is that cross section poverty research may not be able to identify the poor in this study we explore this short run variability further we use a data set on a panel of 1450 households in different communities in rural ethiopia surveyed thrice over 18 months on average year to year poverty is very similar however we find high variability in consumption and poverty over the seasons and year by year econometric analysis suggests that consumption is affected by idiosyncratic and common shocks including rainfall and household specific crop failure while households respond to seasonal incentives related to changing labour demand and prices the results imply that a larger number of households are vulnerable to shocks than implied by the standard poverty statistics while some of the non poor in the

network interconnection in telecommunications this paper discusses industries such as telecommunications where firms each have their own customers and must interconnect with other firms to provide a comprehensive service two scenarios are considered i the case of a symmetric unregulated industry and ii the case of an industry with a dominant regulated incumbent in the first provided there is sufficient product differentiation it is shown that firms agree to set interconnection charges above associated costs in order to obtain the joint profit maximising outcome in the second a formula for the welfare maximizing interconnection charge is derived relations with the efficient component pricing rule are discussed

risk preferences technology adoption and insurance uptake a framed experiment abstract despite the yield improvements associated with the adoption of new farming technologies and modern inputs technology diffusion amongst small scale farmers in developing countries is slow in this context given the inherently risky environments in which farmers in the developing world operate poor households are thought to be caught in a risk induced poverty trap specifically poorer households that are unable to insulate themselves from consumption risk avoid these risks by opting for lower return lower risk agriculture and thus do not benefit from technological innovation using a series of laboratory experiments in a south african setting this paper examines whether the provision of a framed index insurance product induces individuals to opt into riskier but potentially more profitable activities to do so we use a simple gambling task with real monetary prizes to elicit subjects risk preferences elicited risk preferences are applied to the uptake of credit and insurance in a series of framed insurance simulation games experiment participants are small scale and subsistence urban food growers overall the results of the experiment lend empirical weight to the poverty trap argument firstly a high degree of risk aversion is evident among the sample secondly risk averse individuals are more likely to opt into traditional agriculture reflected as traditional seeds in the experiment and are less likely to use modern farming inputs that require financing high yield varieties despite the availability of insurance the results indicate that the provision of index insurance is not a panacea for the problem of promoting technology diffusion to small scale farmers in the developing world but that residual production risk and basis risk must be considered in the contract design

households vulnerability from trade in vietnam abstract this paper assesses vulnerability from trade in vietnam by presenting an extended version of ligon and schechter s 2003 vulnerability as low expected utility veu measure it uses the vietnam household living standard surveys vhlss panel data covering the period 2002 06 the empirical results show that risk induced vulnerability and heterogeneity in trade exposure matter in determining household overall vulnerability and that this is not linked to the actual manifestation of shocks although it does not represent by any means an argument against free trade this work is relevant for policymaking since it contributes to deepen our knowledge on the subtle links between trade openness and vulnerability and informs us about suitable instruments to accompany it

the effects of risk and shocks on non farm enterprise development in rural ethiopia summary this paper assesses the impact of risk and shocks on non farm enterprise development in rural ethiopia using a matched household enterprise community dataset augmented with precipitation based measures of risk the likelihood of running a non farm firm and the returns to running such firms co vary with agricultural productivity shocks diversification into non farm activities thus provides limited protection against fluctuations in agricultural performance this may explain why ex ante risk has no impact on the likelihood of running a non farm firm it nonetheless hampers non farm enterprise development by repressing investment and inducing sorting into less capital intensive activities

network competition i overview and nondiscriminatory pricing we develop a model of unregulated competition between interconnected networks and analyze the mature and transition phases of the industry in this deregulated environ ment networks pay negotiated or regulated access charges to each other and com pete in prices for customers we show that a competitive equilibrium may fail to exist for large access charges or for large network substitutability and that freely negotiated access charges may prevent effective competition in the mature phase of the industry and erect barriers to entry in the transition toward competition last we examine the meaning and impact of policies such as the efficient component pricing rule

gender and the dynamics of technology adoption empirical evidence from a household level panel data very few empirical studies account for the dynamic nature of the agricultural technology adoption decision and none of these explores if this dynamic nature depends on the gender of the decision maker using four waves of a household level ugandan panel data this is the first empirical analysis to account for self learning one s own adoption experience in explaining current adoption decision in a developing country context and the first to study the interaction between self learning and gender technology adoption is defined as adoption of hybrid seed inorganic fertilizer or pesticides our results indicate that the dynamic panel data probit model is superior to its static counterpart in the sense that self learning captured by lagged technology adoption indicators is by far the most important determinant of technology adoption we also find a weaker impact of self learning for female headed households than male headed households female headed households face fewer learning opportunities which produce a lower self learning impact in later periods further exacerbating the gap in technology adoption among male and female headed households

insuring well being buyer s remorse and peace of mind effects from insurance this paper estimates the causal effects of index insurance coverage on subjective well being among livestock herders in southern ethiopia the randomization of incentives to purchase index based livestock insurance and three rounds of panel data are exploited to separately identify ex ante welfare gains from insurance that reduces risk exposure and ex post buyer s remorse effects that may arise after the resolution of uncertainty insurance coverage currently in force generates subjective well being gains that are significantly higher than the buyer s remorse effect of an insurance that lapsed without paying out given the temporal correlation in insurance purchase propensity failure to control for potential buyer s remorse effects can bias downward estimates of welfare gains from current insurance coverage

income risk and household schooling decisions in burkina faso summary i study the effects of income uncertainty on household schooling decisions households with more volatile incomes have a greater incentive to build a buffer stock to insure against unforeseen adverse shocks and non enrollment can be part of such a strategy i use data from rural burkina faso where school attainment is low and income shocks are frequent to show that income uncertainty reduces several educational outcomes including enrollment education expenditures and years of education completed the findings suggest that income uncertainty has larger welfare costs in terms of human capital than is implied by studies that only focus on realized income shocks

cattle sharing and rental contracts in an agrarian economy evidence from ethiopia empirical evidence on the role of cattle sharing and rental contracts in agrarian economies is limited this article is an investigation of different types of cattle sharing and rental contracts producers in rural ethiopia adopt it also investigates why households in rural ethiopia rely on these contracts that are vulnerable and therefore subject to potential moral hazard problems described in earlier literature we apply random effect probit and control function econometric methods to household panel data collected in 2005 and 2007 from two agro ecological zones in ethiopia controlling for the endogeneity of access to livestock credit we find that contracts are spatially fragmented and better developed where population density is high and credit and insurance markets are poorly developed we also find that contracts help cash poor and credit constrained households to improve their herd dynamics to get access to nonlivestock resources land labor and cash and share risks that could have been difficult without the contract we show that contracts are rational responses of residents in rural communities characterized by imperfect credit and insurance services since households with better access to credit are less likely to rely on contracts

risk rationing and wealth effects in credit markets theory and implications for agricultural development we develop a model that shows that asymmetric information can result in two types of credit rationing conventional quantity rationing and risk rationing whereby farmers are able to borrow but only under high collateral contracts that offer them lower expected well being than a safe subsistence activity after exploring its incidence with respect to wealth we show that risk rationing has important policy implications specifically land titling will be only partially effective because it does not enhance producers willingness to offer up the collateral needed to secure loans under moral hazard constraints efforts to enhance agricultural investment and the working of agricultural credit markets must step beyond land titling and also deal with risk copyright 2008 oxford university press

consumption risk technology adoption and poverty traps evidence from ethiopia much has been written on the determinants of input and technology adoption in agriculture with issues such as input availability knowledge and education risk preferences profitability and credit constraints receiving much attention this paper focuses on a factor that has been less well documented the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests building on an explicit model this is explored in panel data for ethiopia historical rainfall distributions are used to identify the counterfactual consumption risk controlling for unobserved household and time varying village characteristics it emerges that not just ex ante credit constraints but also the possibly low consumption outcomes when harvests fail discourage the application of fertilizer the lack of insurance causes inefficiency in production choices