Perceptions of Risk within Pastoralist Households in Northern Kenya and Southern Ethiopia

Perceptions of risk may vary within households as well as across households and communities. In this paper, we take advantage of panel survey data collected quarterly over a period of 2 ½ years to see how perceptions of risk vary across individuals over time. The surveyed households are in pastoralist communities in Northern Kenya and Southern Ethiopia and the survey period coincides with a severe drought in this region and the beginning of the recovery. We identify the structural heterogeneity of the perceptions of risk of these individuals. Because of the nature of panel data, we can also test how the perceptions of risk are affected by shocks in previous periods. In particular, we ask how an individual's risk perceptions change when shocks happen to him or herself, to other members of his or her, family, or to members of his or her community. This allows us to ask how expectations adapt based on the things that are happening to others and allows us to look at issues of social networks and learning.