In most low-income countries, rural households depend on mixed rain-fed agriculture/livestock production, which is very risky. Due to numerous market failures, there are few ways to shift risks to third parties. The literature has focused on what determines the responses of households in such environments. Of special concern are path dependencies in which households experiencing failure are prone to further failure and potential poverty traps. This paper estimates levels and determinants of risk aversion in the highlands of Ethiopia. We find high risk aversion and evidence that constraints have important impacts on risk-averting behavior with perhaps significant implications for long-term poverty. The results also suggest the possibility of path dependence and offer insights into links between risk aversion and poverty traps. Copyright 2009, Oxford University Press.

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Journal articleISI; IFPRI3EPTDP

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Traditional energy technologies and consumer products contribute to household well-being in diverse ways but also often harm household air quality. We review the problem of household air pollution at a global scale, focusing particularly on the harmful effects of traditional cooking and heating. Drawing on the theory of household production of health, we illustrate the ambiguous relationship between household well-being and adoption of behaviors and technologies that reduce air pollution. We then review how the theory relates to the seemingly contradictory findings emerging from the literature on household demand for clean fuels and stoves. In conclusion, we describe an economics research agenda to close the knowledge gaps so that policies and programs can be designed and evaluated to solve this critical global problem.