Article ID Journal Published Year Pages File Type
992124 World Development 2013 18 Pages PDF
Abstract

SummaryThis 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.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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