Market participation, productivity and poverty among farm households: Results from Tanzania, Vietnam and Guatemala
Abstract
Poverty is higher among farmers with low market participation and low productivity. Governments and international organizations often target either one or the other to improve farmer's income. But the way in which market participation and agricultural productivity affect each other remains unclear. Moreover, instances in development strategies are clouded by important questions. Are improvements in market participation and productivity both needed to alleviate poverty? Are the poor net buyers of all crops, or only certain staples? Are the poorest farmers net buyers of all crops, or only certain staples? How do trade agreements or other causes of changing prices affect the distribution of farm income? The innovation of this study is to use a large sample of merged cross-country household surveys to address these questions. The entire sample consists of 11,209 farm households gathered from LSMS surveys conducted by the World Bank in Tanzania, Vietnam and Guatemala. The first study builds upon international trade literature to analyze the relationship between market participation and productivity using a 2SLS approach. Results indicate that households with higher productivity tend to participate in agricultural markets regardless of market access factors. In contrast, having better market access does not necessarily lead to higher productivity. This finding suggests that investments in infrastructure provide minimal, if any, improvements in agricultural productivity, whereas programs targeted at enhancements in farm structure and capital have the potential to increase both productivity and market participation. In the second study, the effect of market participation and productivity on poverty is evaluated using 2SLS. Both market participation and productivity have independent effects on poverty, but the effect of market participation is weaker than productivity. Thus, poverty alleviation programs facing scarce resources should give priority to improvements in productivity. The third study analyzes the association between market participation and income distribution using non-parametric regressions. The poor are net buyers of each crop but only the poorest are net buyers of all crops. Price change policies might be used as mechanisms to improve living standards among the poor. However, caution should be exercised when implementing these programs because welfare outcomes vary substantially not only among crops and across countries, but also over time.
Degree
Ph.D.
Advisors
Masters, Purdue University.
Subject Area
Agricultural economics
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