Browsing by Author "Alem, Yonas"

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Decision-making within the Household: The Role of Autonomy and Differences in Preferences
(2018-03) Alem, Yonas; Hassen, Sied; Köhlin, Gunnar; Dept. of Economics, University of Gothenburg
We use a field experiment to identify how differences in preferences and autonomy in decision-making result in sub-optimal adoption of technologies that can maximize the welfare of all members of the household. We create income-earning opportunities and elicit willingness- to-pay (WTP) for energy-efficient cookstoves through a real stove purchase experiment with randomly chosen wives, husbands and couples. Experimental results suggest that women, who often are responsible for cooking and for collecting fuelwood, reveal a higher preference than men for the improved stoves. Using an instrumental variables tobit estimator, we show that women who have higher decision-making autonomy reveal higher WTP than those who have lower decision-making autonomy. A follow-up survey conducted 15 months after the stove purchase show that autonomy does not affect stove use. Our findings highlight the importance of considering division of labor, different preferences, and bargaining power differences within the household when promoting adoption of new household technologies.
Do Safety Nets Promote Technology Adoption? Panel data evidence from rural Ethiopia
(2013-02) Alem, Yonas; Broussard, Nzinga H.; Dept of Economics, University of Gothenburg
We use panel data from rural Ethiopia to investigate if participation in a safety net program enhances fertilizer adoption. Using a difference-in-difference estimator and inverse propensity score weighting we find that participation in Ethiopia’s food-for-work program increased fertilizer adoption. Results also indicate that the likelihood of adopting and the intensity of fertilizer usage increased with livestock holdings for food-for-work-participant households providing some evidence that the intervention helped asset-rich farm households more than asset-poor households. We find no significant effects of free distribution on fertilizer adoption or intensification. Our results are consistent with the hypothesis that safety nets can be viewed as mechanisms that allow households to take on more risk to pursue higher profits. The paper highlights important policy implications related to the inter-related dynamics of safety nets and extension services that aim at promoting productivity enhancing modern agricultural technologies.
Does Fertilizer Use Respond to Rainfall Variability? Panel Data Evidence from Ethiopia
(2009-01-05T07:24:53Z) Alem, Yonas; Bezabih, Mintewab; Kassie, Menale; Zikhali, Precious
In this paper we use farmers' actual experiences with changes in rainfall levels and their responses to these changes to assess if patterns of fertilizer use are responsive to changes in rainfall patterns. Using plot and farm level panel data from the central Highlands of Ethiopia matched with corresponding village level rainfall data; results show that both the current year’s decision to adopt and the intensity of fertilizer adoption is positively associated with higher rainfall levels experienced in the previous year. Furthermore, we find a concave relationship between previous season rainfall levels and fertilizer adoption, indicating that too much rainfall discourages adoption. Abundant rainfall in the previous year could depict relaxed liquidity constraints and increased affordability of fertilizer, which makes rainfall availability critical in severely credit constrained environments. In light of similar existing literature, the major contribution of the study is its use of plot level panel data, which permits us to investigate the importance of plot characteristics in fertilizer adoption decisions.
Essays on Shocks, Welfare, and Poverty Dynamics: Microeconometric Evidence from Ethiopia
(2011-04-20) Alem, Yonas
Five self-contained papers constitute this thesis. Paper 1: Does fertilizer use respond to rainfall variability? Panel data evidence from urban Ethiopia In this article, we use farmers’ actual experiences with changes in rainfall levels and their responses to these changes to assess whether patterns of fertilizer use are responsive to changes in rainfall patterns. Using panel data from the Central Highlands of Ethiopia matched with corresponding village-level rainfall data, the results show that the intensity of current year’s fertilizer use is positively associated with higher rainfall levels experienced in the previous year. Rainfall variability, on the other hand, impacts fertilizer use decisions negatively, implying that variability raises the risks and uncertainty associated with fertilizer use. Abundant rainfall in the previous year could depict relaxed liquidity constraints and increased affordability of fertilizer, which makes rainfall availability critical in severely credit-constrained environments. In light of similar existing literature, the major contribution of the study is that it uses panel data to explicitly examine farmers’ responses to actual weather changes and variability. Paper 2: Household-level consumption in urban Ethiopia: The effects of a large food price shock We use survey data to investigate how urban households in Ethiopia coped with the food price shock in 2008. Qualitative data indicate that the high food price inflation was by far the most adverse economic shock between 2004 and 2008, and that a significant proportion of households had to adjust food consumption in response. Regression results indicate that households with low asset levels, and casual workers, were particularly adversely affected by high food prices. We interpret the results as pointing to the importance of growth in the formal sector so as to generate more well-paid and stable jobs. Paper 3: The impact of food price inflation on consumer welfare in urban Ethiopia: A quadratic almost ideal demand system approach This paper investigates the impact of food price inflation on consumer welfare in urban Ethiopia 2004-2009. A quadratic almost ideal demand system (QUAIDS) is estimated using data from 2000 to 2009. Statistical tests suggest the QUAIDS is preferred over the conventionally used AIDS model. Compensating variation calculated using estimated price elasticities shows that from 2004 to 2009, households in urban Ethiopia lost an equivalent of 15 percent of their food budget annually due to the unprecedented food price inflation. Poor households, who spend a higher proportion of their budget on food, were affected more adversely than non-poor households. Moreover, with a more or less uniform increase in the price of major food items, households in urban Ethiopia appear to have limited options for substitution. These findings can provide important information to policy makers and can help aid organizations design and implement better social assistance schemes in the future. Paper 4: What do policy makers know about the factors influencing citizens’ subjective well-being? In light of the increased interest in using subjective well-being as an outcome variable beyond GDP, as for example argued by the Stiglitz Commission, there is an interest in analyzing policymakers’ knowledge on what variables influence citizens’ subjective well-being. We elicit what policymakers guess influence citizens’ subjective well-being with a focus on environmental variables. Our study, conducted on policymakers in Addis Ababa, Ethiopia, shows large heterogeneity in their guesses. Overall, we find that the factors that correlate with citizens’ subjective well-being in Addis Ababa are similar to those found in rich Western countries. Moreover, there is a low correlation between what policymakers guess affects citizens’ subjective well-being and our empirical findings on the matter. As an alternative check for the similarities between citizens’ and policymakers’ preferences, we also undertook a ranking exercise of setting priority areas. Compared to the citizens, policymakers put more weight on longer-term projects. By and large, our study indicates that policymakers have a heterogeneous, and hence a non-negligible proportion of them have a fairly poor understanding of what correlates with citizens’ subjective well-being.
Improving Welfare through Climate-friendly Agriculture: The Case of the System of Rice Intensification
(2015-10) Alem, Yonas; Eggert, Håkan; Ruhinduka, Remidius; Dept. of Economics, University of Gothenburg
We use rich survey data to investigate the impact of a climate-friendly rice farming method known as the system of rice intensification (SRI) on the welfare of rain-dependent small-holder farmers in Tanzania. SRI reduces water consumption by half, which makes it a promising farming system in the adaptation to climate change in moisture-constrained areas, and it does not require flooding of rice fields, resulting in reduced methane emissions. Endogenous switching regression results suggest that SRI indeed improves yield in rain-dependent areas, but its profitability hinges on the actual market price farmers face. SRI becomes profitable only when the rice variety sells at the same market price as that of traditional varieties, but results in loss when SRI rice sells at a lower price. We argue that the effort of promoting adoption of such types of climate-friendly agricultural practices requires complementary institutional reform and support in order to ensure their profitability to small-holder farmers.
Integrating Soil Science into Agricultural Production Frontiers
(2012-12) Ekbom, Anders; Alem, Yonas; Sterner, Thomas; Dept of Economics, University of Gothenburg
This paper integrates soil science variables into an economic analysis of agricultural output among small-scale farmers in Kenya’s highlands. The integration is valuable because farmers’ choice of inputs depends on both the status of the soil and socio-economic conditions. The study uses a stochastic production frontier in which the individual farm’s distance to the frontier depends systematically on individual factors. We show the importance of including key soil properties and find that phosphorus has a negative output elasticity, suggesting that farms may be using the wrong fertilizer mix. Hence, the central policy implication is that while fertilizers are generally beneficial, their application needs to be based on better soil information. This highlights the importance of strengthening agricultural extension, increased access to markets, and more diversified supply of production inputs.
International Remittances and Private Inter-household Transfers: Exploring the Links
(2015-10) Alem, Yonas; Andersson, Lisa; Dept. of Economics, University of Gothenburg
We investigate the effect of remittances from migrated family members on informal inter- household transfers - an issue that has received limited attention in the literature. Using rich panel data from urban Ethiopia, we show that receiving international remittances significantly increases the value of private domestic inter-household transfers, whereas receiving domestic remittances does not have any effect. We also show that the transfers sent respond to shocks to a great extent. Our results provide new evidence on the trickle-down effects of interna- tional remittances, effects important to consider when analyzing the impact of international remittances on household outcomes in recipient countries.
Life Satisfaction in Urban Ethiopia: Trends and determinants
(2012-12) Alem, Yonas; Köhlin, Gunnar; Dept of Economics, University of Gothenburg
Most studies of subjective well-being in developing countries use cross-sectional data, which makes it difficult to control for unobserved individual heterogeneity. In this paper, we use three rounds of panel data and robust non-linear panel data models to investigate the trends and determinants of life satisfaction in urban Ethiopia. Although Ethiopia exhibited rapid economic growth during the analyzed period, the average reported level of life satisfaction declined. Regression results show that despite the significant difference between urban Ethiopia and industrialized countries in terms of economic and social conditions, many of the determinants of life satisfaction are similar. This includes, age, marital status, health, unemployment, economic status, relative position and educational achievement. Our results also indicate that both individual (respondent) and household level versions of these variables are important determinants of life satisfaction. This provides some evidence on the interdependence of individual and household subjective well-being in developing countries. The fact that rapid economic growth was accompanied by a decline in citizens’ average reported level of life satisfaction brings the pro-poorness of the recent economic growth in Ethiopia into question. We argue that economic growth that trickles down to the poor and ensures creation of stable jobs would be welfare enhancing.
Migration as an Adaptation Strategy to Weather Variability: An Instrumental Variables Probit Analysis
(2016-06) Alem, Yonas; Maurel, Mathilde; Millock, Katrin; Dept. of Economics, University of Gothenburg
There is solid scientific evidence predicting that a large part of the developing world will suffer a greater incidence of extreme weather events, which may increase the incidence of displacement migration. We draw on the new economics of migration to model migration decisions of smallholder and rain-dependent farm households in rural Ethiopia and investigate both the ex-ante and ex-post impacts of climate variables. Using detailed household survey panel data matched with rainfall data, we show that weather variability - measured by the coeffcient of variation of rainfall - has a strong positive impact on the probability of sending a migrant. This implies that households engage in migration to cope with risk ex-ante. We also find evidence suggesting that rainfall shocks have ex-post impact on households' likelihood of migration, but the effect is not statistically significant at the conventional levels. Instrumental variables probit regression results also show that controlling for endogeneity of income using a credible instrument is important to identify its impact on the decision to send a migrant. Our findings have important implications for policies aiming to improve the capacity of vulnerable households to adapt to climate change.
Mind, Behaviour and Health - a Randomised Experiment
(2016-06) Alem, Yonas; Behrendt, Hannah; Belot, Michele; Bíró, Aniko; Dept. of Economics, University of Gothenburg
Behavioural attitudes toward risk and time, as well as behavioural biases such as present bias, are thought to be important drivers of unhealthy lifestyle choices. This paper makes the first attempt to explore the possibility of training the mind to alter these attitudes and biases, in particular health-related behaviours, using a randomized controlled experiment. The training technique we consider is a well-known psychological technique called "mindfulness", which is believed to improve self-control and reduce stress. We conduct the experiment with 139 participants, half of whom receive a four-week mindfulness training, while the other half are asked to watch a four-week series of historical documentaries. We evaluate the impact of our interventions on risk-taking and inter-temporal decisions, as well as on a range of measures of health-related behaviours. We find evidence that mindfulness training reduces perceived stress, but only weak evidence of its impact on behavioural traits and health-related behaviours. Our findings have significant implications for a new domain of research on training the mind to alter behavioural traits and biases that play important roles in lifestyle.
Mindfulness and Stress - a Randomised Experiment
(2018-03) Alem, Yonas; Behrendt, Hannah; Belot, Michele; Bíró, Anikó; Dept. of Economics, University of Gothenburg
We conduct a randomised controlled trial of an online course in mindfulness. Previous research has found evidence that mindfulness reduces stress; however, few studies have been carried out on non-clinical populations that have not self-selected into or paid for treatment. Our sample consists of 139 students with no pre-existing medical conditions and no prior information on the experiment and treatments. Half of them are asked to follow a four-week mindfulness training, while the other half are asked to watch a four-week series of historical documentaries. We follow participants for five consecutive weeks, with an additional post-intervention session five months later. We evaluate the effects of the mindfulness program on measures of chronic stress, and on the response to stressful situations, measured by cortisol and self-reports. We find strong evidence that mindfulness training reduces perceived stress, as measured by the Perceived Stress Scale. However, the physiological responses to an acutely stressful situation do not differ significantly between the treatment and control groups.
Modelling Household Cooking Fuel Choice: a Panel Multinomial Logit Approach
(2015-10) Alem, Yonas; Beyene, Abebe D.; Köhlin, Gunnar; Mekonnen, Alemmu; Dept. of Economics, University of Gothenburg
We use three rounds of a rich panel data set to investigate the determinants of household cooking fuel choice and energy transition in urban Ethiopia. We observe that the expected energy transition did not occur following economic growth in Ethiopia during the decade 2000-2009. Regression results from a random effects multinomial logit model suggest that households’ economic status, price of alternative energy sources, and education are important determinants of fuel choice in urban Ethiopia. The results also suggest the use of multiple fuels, or “fuel stacking behavior” by households. We argue that policy makers could target these policy levers to encourage transition to cleaner energy sources.
Optimal Expectations and the Welfare Cost of Climate Variability
(2013-12) Alem, Yonas; Colmer, Jonathan; Dept of Economics, University of Gothenburg
Uncertainty about the future is an important determinant of well-being, especially in developing countries where financial markets and other market failures result in ineffective insurance mechanisms. However, separating the effects of future uncertainty from realised events, and then measuring its impact on utility presents a number of empirical challenges. This paper addresses these issues and shows that increased climate variability (a proxy for future income uncertainty) reduces farmers’ subjective well-being, consistent with the theory of optimal expectations (Brunnermeier & Parker, 2005), using panel data from rural Ethiopia and a new data set containing daily atmospheric parameters. The magnitude of our result indicates that a one standard deviation (7%) increase in climate variability has an equivalent effect on life satisfaction to a two standard deviation (1-2%) decrease in consumption. This effect is one of the largest determinants of life satisfaction in rural Ethiopia.
Passive Learning and Incentivized Communication: A Randomized Controlled Trial in India
(2018-03) Alem, Yonas; Dugoua, Eugenie; Dept. of Economics, University of Gothenburg
In order to understand the extent of the information barrier to adoption of a household technology, we designed a randomized controlled trial on willingness to pay (WTP) for solar lanterns in India. We gave high quality solar lanterns to randomly selected `seed' households in a non-electrified region of the state of Uttar Pradesh. Three friends of the seed household were randomly assigned to one of the following three groups: control, passive learning and incentivized communication. We elicit WTP from the control group when the seed receives the solar lantern. We elicit WTP from the friends in the passive learning and incentivized communication groups thirty days after the seed receives the solar lantern. We show that passive learning increases WTP by 90% and incentivized communication by 145% relative to the control group. We also show that learning from others is the mechanism that drives the observed WTP by peers.
Poverty Persistence and Intra-Household Heterogeneity in Occupations: Evidence from Urban Ehtiopia
(2013-12) Alem, Yonas; Dept of Economics, University of Gothenburg
Previous studies of poverty in developing countries have to a great extent focused on the characteristics of the household head and used these as proxies for the underlying ability of the household to generate income. This paper uses five rounds of panel data to investigate the persistence of poverty in urban Ethiopia with a particular focus on the role of intra-household heterogeneity in occupations. Dynamic probit and system GMM regression results suggest that international remittances and labor market status of non-head household members are important determinants of households' poverty status. Results also show that controlling for these variables and the initial conditions problem encountered in non-linear dynamic probit models reduces the magnitude of estimated poverty persistence significantly for urban Ethiopia. These findings have important implications for identifying the poor and formulating effective poverty reduction and targeting strategies.
Relative Standing and Life-Satisfaction: Does Unobserved Heterogeneity Matter?
(2013-12) Alem, Yonas; Dept of Economics, University of Gothenburg
Unlike most studies of subjective well-being in developing countries, we use a fixed effects regression on three rounds of rich panel data to investigate the impact of relative standing on life satisfaction of respondents in urban Ethiopia. We find a consistently large negative impact of relative standing - both relative to others and to oneself over time - on subjective well-being. However, controlling for unobserved heterogeneity through a fixed effects model reduces the impact of the relative standing variables on subjective well-being by up to 24 percent and reduces the impact of economic status by about 40 percent. Our findings highlight the need to be cautious in interpreting parameter estimates from subjective well-being regressions based on cross-sectional data, as the impact of variables may not be disentangled from that of unobserved heterogeneity.
Shocks, Remittances and Household Consumption A Dynamic System GMM Analysis
(2028-02) Alem, Yonas; University of Gothenburg
We use a dynamic system GMM regression on ve rounds of panel data to estimate the impact of international remittances on consumption of urban Ethiopian households, who spend more than 70% of their consumption budget on food. Results suggest that international re- mittances play a signi cant role in augmenting household consumption. A 1% increase in remittances from abroad leads to a 0.10% increase in household consumption. Taking advan- tage of the detailed nature of the panel data, we also show that households that experienced idiosyncratic shocks are likely to send a member abroad and receive international remittances. The paper sheds light on the magnitude of the impact of international remittances and the char- acteristics of the socio-economic groups who take advantage of a rapidly changing economic environment, such as access to international migration.
The Dynamics of Electric Cookstove Adoption: Panel data evidence from Ethiopia
(2013-02) Alem, Yonas; Hassen, Sied; Köhlin, Gunnar; Dept of Economics, University of Gothenburg
Previous studies on improved cookstove adoption in developing countries use cross-sectional data, which makes it difficult to control for unobserved heterogeneity and investigate what happens to adoption over time. We use robust non-linear panel data and hazard models on three rounds of panel data from urban Ethiopia to investigate the determinants and dynamics of electric cookstove adoption. We find the price of electricity and firewood, and access to credit as major determinants of adoption and transition. Our findings have important implications for policies aiming at promotion of energy transition and reduction of the pressure on forest resources in developing countries.
The Persistence of Subjective Poverty in Urban Ethiopia
(2012-12) Alem, Yonas; Köhlin, Gunnar; Stage, Jesper; Dept of Economics, University of Gothenburg
Using panel data spanning 15 years, this paper investigates the persistence and correlates of subjective and consumption poverty in urban Ethiopia. Despite the decline in consumption poverty in recent years, which has been linked to rapid economic growth, subjective poverty has remained largely unchanged. Dynamic probit regression results show that households with a history of past poverty continue to perceive themselves as poor even if their material consumption improves. Our results also suggest that the relative economic position of households is a strong determinant of subjective poverty, and having at least some type of employment reduces the likelihood that households will perceive themselves as poor, even if they remain in objective poverty. Receiving remittances from abroad, on the other hand, does not reduce perceived poverty, even if it raises material consumption. We argue that any analysis to measure the impact of growth on welfare should encompass subjective measures as well.
Why (field) experiments on unethical behavior are important: Comparing stated and revealed behavior
(2016-06) Alem, Yonas; Eggert, Håkan; Kocher, Martin G.; Ruhinduka, Remidius D.; Dept. of Economics, University of Gothenburg
Understanding unethical behavior is essential to many phenomena in the real world. We carry out a field experiment in a unique setting that varies the levels of reciprocity and guilt in an ethical decision. A survey more than one year before the field experiment allows us to compare at the individual level stated unethical behavior with revealed behavior in the same situation in the field. Our results indicate a strong discrepancy between stated and revealed behavior, regardless of the specific treatment in the field experiment. This suggests that, given a natural setting, people may actually behave inconsistently with the way in which they otherwise “brand” themselves. Our findings raise caution about the interpretation of stated behavioral measures commonly used in research on unethical behavior. However, we show that inducing reciprocity and guilt leads to a decrease in unethical behavior.