RURAL POVERTY, RISK, AND DEVELOPMENT

TABLE OF CONTENT page
EXECUTIVE SUMMARY (ENGLISH) v
EXECUTIVE SUMMARY (SPANISH) vii
EXECUTIVE SUMMARY (FRENCH) xi
EXECUTIVE SUMMARY (ARABIC) xv
INTRODUCTION 1
CHAPTER I. RISK AND POVERTY 2
Section 1. Life and Risk 2
Section 2. Risk in Poor Rural Economies 4
CHAPTER II. THE RISK COPING STRATEGIES OF THE RURAL POOR 7
Section 1. Reducing Exposure to Shocks 7
1.1 Selecting and modifying the environment 7
1.2 Specialization 8
1.3 Diversification 8
1.4 Self-sufficiency 10
1.5 Flexibility 11
Section 2. Saving and Liquidating Assets 12
2.1 Liquidating productive assets 13
2.2 Labor bonding and debt peonage 14
2.3 Reducing consumption to keep productive assets 15
2.4 Precautionary saving 16
2.5 Borrowing 18
Section 3. Risk Sharing 20
3.1 Implicit risk sharing 23
3.2 Explicit risk sharing 24
3.3 Households and groups 26
3.4 Explicit insurance 28
3.5 Interlinking and patronage 30
3.6 Sharing risk across village boundaries 33
Section 4. Allocation of Scarce Resources Within the Household 35
4.1 Extreme deprivation and selective mortality 35
4.2 Gender and nutrition gap 36
4.3 School drop-outs 36
CHAPTER III. THE LIMITS TO RISK COPING 37
Section 1. The Limits to Self-Protection 37
1.1 Technological and environmental constraints 37
1.2 Property rights and asset markets 38
1.3 The difficulties of precautionary saving 40
Section 2. Risk Sharing, Self-Interest, and Commitment Failure 42
2.1 Social insurance 42
2.2 Family values 44
2.3 Informal risk sharing arrangements 45
2.4 Gifts and risk sharing 47
2.5 Exclusion and renegotiation 49
Section 3. Sharing and Power 50
3.1 Patron-client relationships 50
3.2 Power and coalitions 52
Section 4. Risk Sharing, Credit, and Information 54
4.1 Quasi-credit 54
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4.2 Information asymmetries 58
CHAPTER IV. RISK AND DEVELOPMENT 59
Section 1. Nutrition and Human Capital 59
1.1 Fertility and infant mortality 59
1.2 Nutrition, health, and vulnerability to shocks 61
1.3 School attendance and risk 62
Section 2. Risk and Technological Innovation 62
2.1 Production choices and risk 63
2.2 Diversification and specialization 68
2.3 Technological uncertainty and learning 69
Section 3. Commercial Crops vs. Subsistence Farming 70
3.1 Effect of consumption preferences on crop choices 72
3.2 Market integration and food self-sufficiency 75
3.3 Modelling correlation between prices, revenues and output 75
3.4 Simulation results 76
3.5 Policy implications 77
Section 4. Precautionary Saving and Investment Constraints 78
4.1 Investment and precautionary saving 80
4.2 A model of irreversible non-divisible investment 80
4.3 Precautionary saving and reversible investment 82
4.4 Poverty, shocks, and investment 83
4.5 Credit constraints and poverty trap 84
4.6 Poverty, investment, and non-divisibility 86
Section 5. Risk Sharing and Risk Taking 86
5.1 Norms of risk sharing in rural communities 86
5.2 Circumstantial evidence on individualism 87
5.3 Risk sharing, investment, and saving 88
5.4 Patronage and inequality 89
5.5 Egalitarian norms 89
5.6 Social structure and patronage 90
5.7 Patronage, accumulation, and returns to scale 90
CONCLUSIONS 92
Section 1. What We Have Learned 92
Section 2. What We Do Not Know 96
Section 3. What Local Governments Can Do 98
Section 4. What the International Community Can Do 101
APPENDIX: PROOFS OF PROPOSITIONS 103
FIGURES 107
REFERENCES