Description

Abstract: Previous empirical work by the PARIMA project found evidence of highly nonlinear cattle accumulation dynamics among the Borana pastoralists of southern Ethiopia, consistent with the hypothesis of poverty traps. We explore two critical, logically subsequent questions: (1) Do Borana pastoralists understand these dynamics?; and (2) If they do, what are the consequences for informal inter-household gifts and loans of cattle? Using original primary data collected among the same population, we find that Borana pastoralists accurately perceive observed herd dynamics and that these patterns appear to result from adverse weather shocks affecting primarily households of intermediate or better herding ability. This underscores the importance of asset protection in the face of unanticipated shocks and has consequences on the design of transfer arrangements. In particular, we find that cattle transfers respond to recipients’ cattle losses, but only so long as the recipient’s herd does not fall too far below the critical asset threshold at which herd dynamics bifurcate. Those who are or become destitute disappear from social networks and do not receive transfers in response to shocks, so that public safety nets are required for the poorest households as complements to, rather than substitutes for, informal private social safety nets.