Modelling Sequencing Patterns in Asset Acquisition: The Case of Smallholder Farmers in Three Rural Districts in Uganda

Abstract

Poor smallholder farmers in Uganda live at or below subsistence level. They are vulnerable to multiple risks and insecurities and have limited access to capital markets and insurance. Their asset base is a reflection of the economic conditions of the farming households. In this article we propose a model to estimate household sequencing patterns in asset acquisition among rural smallholder farmers in Uganda using only cross-section data. The principal assumption underlying the model is that people tend to accumulate assets in a particular dominant order, which could arise from a combination of indivisibilities and missing capital markets. The model is applied to a field-survey dataset consisting of 938 farm households from three districts in Uganda. The physical assets included are simple count data of household durables and agricultural tools. The model predicts the distribution of asset ownership, conditional on the number of assets owned. The estimated model predicts highly concentrated conditional distributions, consistent with the assumption of sequencing patterns of asset acquisition. Based on the sequencing patterns the paper proposes a low-cost poverty monitoring instrument using only asset count data.