14th journées Louis-André Gérard-Varet

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Wait and Sell: Farmers Preferences and Grain Storage in Burkina Faso
Tristan Le Cotty, Elodie Maître d'Hôtel, Raphaël Soubeyran, Julie Subervie

Last modified: 2015-03-12

Abstract


In West-African countries, inter-seasonal variability of grain prices is often high. Yet many farmers appear not to take advantage of it through storage as they would be expected to do. This paper shows that heterogeneity in storage behaviours is not only explained by heterogeneity in financial constraints but also by heterogeneity in individual preferences. We provide a stylized on-farm storage model in which impatience and risk aversion interact in the storage decision process. Parameterized to our data, the model predicts that stored quantities decrease with impatience and increase with risk aversion.

In order to test these predictions and quantify these effects, we use original data on agricultural decisions, which we have collected from 1,500 farmers in two regions of Burkina Faso, who were also asked hypothetical questions about risk aversion and time discounting.

Our econometric analysis based on a sample selection model yields results that are consistent with theoretical predictions. A one-standard-deviation increase in the discount rate (resp. risk aversion) appears to result in a large decrease (resp. increase) on storage of about 45% (resp. 25%). Moreover, the structural estimation of the theoretical model leads to results that are very similar in size. Finally, we use the theoretical model to simulate public policies. We show that the amount of cash that would compensate the median farmer for not implementing a grain price stabilization policy is about 14,000 FCFA.


Keywords


storage; discount rate; risk aversion