How Costly Is It for Poor Farmers to Lift Themselves Out of Subsistence?

The main objective of this paper is to provide estimates of the cost of moving out of subsistence for Madagascar's farmers. The analysis is based on a simple asset-return model of occupational choice. Estimates suggest that the entry (sunk) cost associated with moving out of subsistence can be...

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Bibliographic Details
Main Authors:	Cadot, Olivier, Dutoit, Laure, Olarreaga, Marcelo
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ACREAGE ADJUSTMENT ASSISTANCE AGRICULTURAL MARKETS AGRICULTURAL PRODUCTION AGRICULTURAL PRODUCTS AGRICULTURAL REVENUE AGRICULTURE ORGANIZATION ARBITRAGE BALANCE SHEETS BARRIERS TO ENTRY BENCHMARK CANE SUGAR CASH CROPS CASH INCOME COMMERCIAL AGRICULTURE COMMERCIAL FARMING COMPARATIVE ADVANTAGE CONSUMER PRICES CONSUMPTION EXPENDITURES COTTON CREDIT MARKETS CROPLAND DEVELOPMENT ECONOMICS DISCOUNTED VALUE DIVERSIFICATION DIVIDENDS ECONOMIES OF SCALE EQUATIONS EXPECTED RETURN EXPENDITURE EXPENDITURES EXPORT EXPORTS EXTREME POVERTY FAIR FARM FARM OUTPUT FARM POPULATION FARM SIZE FARMER FARMERS FARMS FEMALE-HEADED HOUSEHOLDS FLAVOR FOOD CROPS GDP HOUSEHOLD HEAD HOUSEHOLD HEADS HURDLES INTENSIVE FARMING INTEREST RATE LACK OF CREDIT LAND OWNERSHIP LANDOWNER LDCS LIVESTOCK LIVESTOCK SALES MARKET DISRUPTION MARKET ENTRY MARKET ENTRY COST MARKET FAILURE MARKET FAILURES MARKET PARTICIPANTS MARKET PRICES MARKET REFORMS MARKET SECTOR MARKET STRUCTURE MARKETING MARKETING BOARDS MIDDLEMEN MILLS MORAL HAZARD OPPORTUNITY COST OPPORTUNITY COSTS OWNERSHIP STRUCTURE POOR COUNTRIES POOR FARMERS POVERTY ALLEVIATION POVERTY LINE PRICE CHANGES PRICE INDEX PRICE INDICES PRICE VOLATILITY PRODUCER ASSOCIATION PRODUCER PRICES PRODUCT DIFFERENTIATION REAL INCOME RISK AVERSION RISK PREMIUM RURAL AREA RURAL CREDIT RURAL HOUSEHOLDS RURAL POVERTY RURAL ROADS SALE SALES SCHOOLING SHARECROPPING SUBSISTENCE SUBSISTENCE AGRICULTURE SUBSISTENCE FARMERS SUBSISTENCE FARMING SUGAR SUGAR CANE SUNK COSTS SURPLUS TRADE FLOWS TRADE REFORMS TRANSACTION VALUATION VOLATILITY THRESHOLD REGRESSION SWITCHING REGRESSION UNKNOWN SAMPLE SEPARATION ENTRY COSTS.
Online Access:	http://documents.worldbank.org/curated/en/2006/04/6710341/costly-poor-farmers-lift-out-poverty http://hdl.handle.net/10986/8733

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Summary:	The main objective of this paper is to provide estimates of the cost of moving out of subsistence for Madagascar's farmers. The analysis is based on a simple asset-return model of occupational choice. Estimates suggest that the entry (sunk) cost associated with moving out of subsistence can be quite large - somewhere between 124 and 153 percent of a subsistence farmer's annual production. Our results make it possible to identify farm characteristics likely to generate large gains, if moved out of subsistence, yielding useful information for the targeting of trade-adjustment assistance programs.

How Costly Is It for Poor Farmers to Lift Themselves Out of Subsistence?

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