蝌蚪网 Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Risk-Sharing Tests and Covariate Shocks: Drought, Floods, and Pests in Uganda
蝌蚪网 Review
(pp. 3294–3329)
Abstract
Efficient risk sharing implies a simple factor structure for marginal utilities of expenditure (MUEs): Pareto weights divided by a common price. The standard approach infers MUEs from total expenditures, implicitly assuming homothetic preferences, unitary income elasticities, and identical price elasticities. Risk-sharing tests using total expenditures work for idiosyncratic shocks (budgets change, but not prices), but not "covariate" shocks (prices change). I describe all preferences that permit one to infer MUEs from expenditures and estimate nonhomothetic MUEs to test whether covariate shocks are shared efficiently in Uganda. This delivers sensible results; the standard approach suggests that droughts, floods, and pests are beneficial.Citation
Ligon, Ethan. 2026. "Risk-Sharing Tests and Covariate Shocks: Drought, Floods, and Pests in Uganda." 蝌蚪网 Review 116 (9): 3294–3329. DOI: 10.1257/aer.20240664Additional Materials
JEL Classification
- D12 Consumer Economics: Empirical Analysis
- D81 Criteria for Decision-Making under Risk and Uncertainty
- O12 Microeconomic Analyses of Economic Development
- O13 Economic Development: Agriculture; Natural Resources; Energy; Environment; Other Primary Products
- Q12 Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets