Africa Institute for Research in Economics and Social Sciences organizes a seminar on Thursday, November 10th at 12:30 p.m at the Rabat Campus of Mohammed VI Polytechnic University under the theme “Very Real Options: Livestock as a Buffer Stock in Sub-Saharan Africa”
Our guest speaker for this event is Jean-Louis Arcand (The Graduate Institute, Geneva, FERDI and UM6P).
Agriculture in many sub-Saharan African countries is largely rain-fed and particularly vulnerable to weather shocks. There is a long-standing hypothesis (Fafchamps, Udry and Czukas, 1998) that households use their livestock as a buffer stock to protect themselves from income fluctuations due to these unanticipated shocks, given the absence of functioning insurance markets. We use a large household panel dataset for Burkina Faso combined with high-resolution climate rasters to empirically probe the buffer stock hypothesis. We then construct a mixed-classical impulse control model which is compatible with our reduced form empirical evidence that accounts for continuous consumption and discrete livestock transactions, and that distinguishes between ex ante (anticipated) and ex post (reaction) behavior. We present preliminary structural evidence concerning the magnitude of the welfare loss due to missing insurance markets.