New Journal Paper on exchange asymmetries in productive assets

The paper "Exchange asymmetries in productive assets: Tools, fertilizer or cash?" written by Stein T. Holden and Sosina Bezu will be published in World Development.

New Journal Paper on exchange asymmetries in productive assets

The paper is published as a New Journal Paper and can be downloaded here.

Abstract of the paper
Exchange asymmetries in individual decision-making have attracted substantial attention from economists since Thaler (1980) referred to the phenomenon that losses are weighted more heavily than gains as an “endowment effect” and related it to loss aversion and prospect theory. We used a field experiment to investigate exchange asymmetries in productive assets among poor rural respondents in Ethiopia. Farmers were randomly allocated two types of productive assets (tool or fertilizer) or cash, with a choice to keep the productive asset (cash) or exchange it for cash (productive asset). Loss aversion was proxied with a separate experiment and was used to assess the importance of endowment effect theory to explain exchange asymmetries. Our study finds a significant exchange asymmetry and a greater exchange asymmetry for the more popular tool than for fertilizer. Loss aversion could explain a small but significant part of the exchange asymmetry in tools, but trade experience did not reduce the exchange asymmetry. The findings are relevant for whether to use targeted in-kind or cash transfers to stimulate technology adoption and enhance food security among poor rural households. The results imply that in-kind transfers may stimulate input use or investments more than cash transfers.

Published 10. December 2018 - 11:24 - Updated 10. December 2018 - 11:24