An Ordered Tobit Model of Market Participation: Evidence from Kenya and Ethiopia

Do rural households in developing countries make market participation and volume decisions simultaneously or sequentially? This article develops a two-stage econometric model that allows testing between these two competing hypotheses regarding household-level market behavior. The first stage models the household's choice of whether to be a net buyer, autarkic, or a net seller in the market. The second stage models the quantity bought (sold) for net buyers (sellers) based on observable household characteristics. Using household data from Kenya and Ethiopia on livestock markets, we find evidence in favor of sequential decision-making, the welfare implications of which we discuss.


Issue Date:
2005
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/14748
Total Pages:
41
Series Statement:
Cornell University Department of Applied Economics and Management Working Paper WP 2005-10




 Record created 2017-04-01, last modified 2017-08-23

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