Contrasting income shocks with asset shocks: livestock sales in northern Kenya

The literature on risk management in agrarian economies has predominantly focused on the use of assets to buffer consumption against income shocks. However, households in certain low-income, high-risk environments confront asset as well as income shocks. This study investigates livestock sales behavior in an environment where both income and asset shocks occur. The nature of each type of shock is analyzed, and their respective impact on sales behavior is identified. Results indicate income and asset shocks are positively correlated, but influence sales in an offsetting fashion. This provides a possible explanation for the limited empirical support found by previous studies investigating the role of livestock sales in buffering consumption. Marketing and savings institutions that reduce vulnerability to asset shocks in addition to income shocks offer the potential to reduce household risk exposure. Copyright 2004, Oxford University Press.