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Price Expectation Formation of Smallholder Farmers in Ethiopia: what Explains their Forecasting Efficiency?

Abstract: 

Economic agents use different information to make decisions on their economic activities. Given that there is a time lag between production decision and output realization, as the intrinsic nature of agriculture price expectation plays a crucial role in the production, marketing and agricultural technology adoption of farmers. The empirical findings show that information regarding current and past output prices in nearby grain markets, central wholesale prices and seasonal rainfall shapes smallholders’ price expectations. Moreover, the results suggest that farmers who have better access to information and who reside closer to grain markets are more likely to have smaller forecasting error margins. On the contrary, farmers who are more risk averse and who have higher discount rates are more likely to have larger forecasting errors. Accordingly, it might be necessary for the government to provide market information as public goods through organized market information systems. Thus, improving both information and physical infrastructure is important. Agricultural extension agents could also assist by disseminating timely and accurate output and input price information from nearby grain markets to farmers in local villages.

Corporate Author: 
Ethiopian Economics Association (EEA)
Publisher: 
Ethiopian Economics Association (EEA)
ISBN/ISSN: 
978-99944-54-45-7
Primary Descriptors: 

Price

Secondary Descriptor: 

prediction accuracy

Geographic Descriptors: 
Ethiopia
Cataloge Date: 
10/02/2015
Broad Subject heading: 
Agriculture, smallholders
Call Number: 
330.963 PRO 2015
Serial Key Title: 
Proceedings of the Twelfth International Conference on the Ethiopian Economy
Publication catagory: 
Content type: 
Volume: 
II
Publication date: 
2015-06-01 00:00:00
Conference Place: 
EEA Conference Center
Place of publication: 
Addis Ababa, Ethiopia
Type of material: 
Book
Current frequency: 
Annually
Conference date: 
July 16 to 19, 2014