1. Rain and Impatience: Field Evidence from Rural Ethiopia Salvatore Di Falco, University of Geneva Peter Berck, University of California, Berkeley Mintewab Bezabih, LSE Gunnar Köhlin, University of Gothenburg

2. Motivation Rate of time preferences are important features in economics as they can explain why people remain poor More impatient people may be less prone to capital accumulation and therefore invest less or adopt less productivity enhancing technologies (Cardenas and Carpenter, 2013; Tanaka, Camerer and Nguyen, 2010; Duflo, Kremer and Robinson, 2011)

3. Behavioral parameters Mainstream economic view: RTP fixed and stable (Harrison et al., 2002; Liu and Wang, 2013) Exposure to shocks can affect outlook on life “Malleable preferences” (Voors et al. 2012) Krupka and Stephens (2013), Tanaka and Munro (2014), Carvalho et al. (2014), Dean and Sautmann (2014). Climatic impacts – anomalous weather

4. This paper 1/ Examine the causal effect of exposure to rainfall anomalies during the growing seasons 2/ Stability of time preferences? Investigate the implications of higher impatience on investment decisions (e.g., Shiferaw and Holden, 1999; Jagger and Pender, 2003; Liu and Wang, 2013; Barham et al., 2014)

5. Panel data: elicitation of rate of time preference at two different points in time Spatial and temporal variation in 2005 and 2007 Rainfall anomalies during the main growing season A dummy are calculated in case of an anomaly between - 1 and -2 standard deviations, a second dummy is computed in case of an indicator between -2 and -3, and a third dummy is calculated if the drought was less than -3 standard deviation below the long term average. Same procedure was implemented for positive anomalies

6. Impatience Ask farmers to choose between a smaller pay-off immediately and receiving a larger pay-off later (Tversky and Kahnemann, 1986; Benzion et al., 1989; Shelley, 1993) Would you prefer a payment of 50 Ethiopian Birr today and 65 Ethiopian Birr in the next year? Would you prefer 50 Ethiopian Birr today or 80 Ethiopian Birr in the next year? We interpret the choice of the immediate payment as “impatient”

7. Hypothetical: Is it a problem? Individual hypothetical willingness to wait for a payment Can this capture real behaviour? Yes it does (Jaeger et al., 2007; Dohmen and Falk, 2010; Dohmen et al. 2011; Visher et al. 2013) Hypothetical questions have the advantage of tackling tactical and pratical problems associated with the elicitation of time preferences (Thaler, 1981) Questions about the future (Frederick, Lowenstein and O’Donoghue, 2002) Validation with ROSCAS

9. Model to estimate

10. Results

12. Instability? 39% of individuals changed their measured impatience from one round to the other

15. Conclusions Negative income shocks cause an increase farmers’ elicited impatience An economic explanation of instability Higher impatience is correlated with less investment in soil conservation and livestock Future climatic scenarios in Ethiopia indicate an increase in negative rainfall anomalies. More frequent negative events such as droughts, if experienced during the growing season, will likely increase individuals impatience

16. A potential environmental-behavioural poverty trap may arise Strategies that can reduce discounting responses to anomalous climatic events (e.g., irrigation, insurance, safety nets programs) can potentially have positive impact on investment decisions Important caveat: we observe changes in the discount factor in a relatively short time span Longer run

17. Comments are very welcome salvatore.difalco@unige.ch