Article
Stochastic Wealth Dynamics and Risk Management Among a Poor Population
The Economic Journal
(2004)
Abstract
We 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.
Keywords
- Stochastic Wealth Dynamics,
- Risk Management,
- Poor Population
Disciplines
Publication Date
2004
DOI
https://www.jstor.org/stable/359023
Citation Information
Lybbert, T., C. Barrett, S. Desta, and D.L. Coppock. 2004. Stochastic wealth dynamics and risk management among a poor population. The Economic Journal 114: 750-777.