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Droughts, hurricanes, and other environmental shocks punctuate the lives of poor and vulnerable populations in many parts of the world. The direct impacts can be horrific, but what are the longer-term effects of such shocks on households and their livelihoods? Under what circumstances will shocks push households into poverty traps from which recovery may not be possible without external assistance? In an effort to answer these questions, this paper analyzes the asset dynamics of Ethiopian and Honduran households in the wake of severe environmental shocks. While the patterns are different across countries, both reveal worlds in which the poorest households struggle most with shocks, adopting coping strategies which are costly in terms of both short term and long-term well being. Key words--poverty traps, natural disasters, Honduras, Ethiopia

The lack of social capital and social mobility, which will act as building blocks, for slow pace of development in South Africa, is explored. This study used quantitative and qualitative methods.

An asset-based approach to poverty analysis is presented. It also deliberates the possibility of identifying strategies for empirical evaluation of poverty traps, long-term poverty and extension of Foster-Greer-Thorbecke class of poverty measures. Asset-based approach can be used in the poverty reduction strategies.

This article explores the impacts on credit access and agrarian structure of land market liberalization policies undertaken in Honduras and Nicaragua during the 1990s. Like liberalizalion efforts pursued in many Latin American countries, these market-friendly reforms were designed to activate land transfers and enhance agricultural efficiency, in large part by improving the access of the rural poor to both credit and land markets. Panel data sets gathered in Honduras and Nicaragua are used to compare title, credit, and land access patterns before and alter the reforms. Descriptive nonparametric regression analyses show that despite major gains in tilling across the land size spectrum, and some increase in land market activity, the other hoped for improvements in credit and land access did not occur, and appear unlikely to occur without further policy attention to credit markets. Key words--land markets, credit markets, agrarian structure, liberalization, Honduras. Nicaragua

A growing literature asks whether low-wealth agents can accumulate assets over time or whether they are trapped in poverty. This paper develops a stochastic dynamic programming model with endogenous asset price risk to explore savings and portfolio decisions in a resource-poor environment characterized by risk and subsistence constraints. Optimal portfolio strategies are found to bifurcate, despite divisible assets and fully rational agents. Wealthier agents acquire a higher-yielding portfolio and pursue conventional consumption smoothing. Poorer agents acquire a less remunerative portfolio and pursue asset smoothing, rather than consumption smoothing. Asset-based risk coping thus results in positive correlation between initial wealth and portfolio rate of return. JEL classification: D91; I32; O16; O12 Keywords: Subsistence; Poverty traps; Savings; Dynamic modeling

South African households live in an environment characterized by risks, and many face a significant probability of experiencing economic losses that threaten their daily subsistence. Using household panel data that include directly solicited information on economic shocks and employing household fixed-effects estimation, we explore how well households cope with shocks by examining the effects of shocks on child nutritional status. Unlike in the idealized village community, some households appear unable to insure against risk, particularly when others in their communities simultaneously suffer large losses. Households in communities with more social capital, however, seem better able to weather shocks. Key words--South Africa, shocks, consumption smoothing, social capital, nutritional status

A 1993 South African living standards survey documented the legacy of apartheid in the form high levels of inequality and human insecurity. Drawing on a 1998 re-survey of households in the 1993 study, this paper explores whether this legacy has been superseded, or whether apartheid's end has been only one kind of freedom that has left households in a poverty trap from which they cannot escape. After proposing a theoretically grounded dynamic poverty typology that distinguishes stochastic from structural poverty transitions, the paper goes on to estimate that significant numbers of the South African poor are potentially trapped in a structural poverty trap and lack the means to escape poverty over time. Key words -- income dynamics, poverty measures, South Africa

A growing literature suggests that asset inequality can be economically costly in the presence of agency costs that constrain labor and capital markets. Unclear in this literature is whether asset markets and optimal individual accumulation of self-finance capacity suffice to eliminate costly inequality over time. This paper uses numerical dynamic programming methods to explore this question with a model of an initially inegalitarian agrarian economy. While an egalitarian asset distribution emerges over time, the process involves sufficiently great productivity losses along the way, that a redistributive policy could improve on the market's performance by both equity and efficiency criteria.

Focusing on the rural sector in Latin America, this paper explores the microeconomic linkages between distribution and growth which drive the possible reproduction of rural poverty over time. The result of this exploration is a neostructuralist perspective which argues that actually existing laissez faire agrarian economies do not present a level playing field, and that low wealth farms face disadvantages which tend to reproduce or even deepen sectoral inequality. The paper then tries to identify the sorts of public policy and collective action which might modify the nature of growth and distribution in post-liberalization agrarian market economy.

The shadow price of capital in production is a useful indicator of the efficacy of the rural financial system. Using data on participants and non-participants in a small farm credit programme from the Pakistani Punjab, this article estimates the shadow price of capital. Endogenous switching regressions techniques are employed to control for the likely heterogeneity of borrowers versus non-borrowers. Results indicate that an individual selected at random from the population of small farmers would experience a 200 per cent rate of return on the first rupee borrowed from the small farm credit programme, indicating a high shadow price of capital and a prima facie case for small farm credit programmes., 1. INTRODUCTION The shadow price of working (or ex-ante) capital in production is a useful indicator of the efficacy of a rural financial system. A shadow price far in excess [...]

Efficient and equitable development outcomes may depend, in part, on whether formal financial institutions leave low-wealth producers tightly constrained in their access to credit. If so, can cooperative institutions efficiently relax these constraints? These issues are explored using survey data gathered from 950 small-scale producer households in areas of Guatemala with market-oriented credit unions that mobilize savings and make unsubsidized loans. Nonprice rationing by banks is found to be common among lower wealth households, while credit unions relax credit constraints for a significant portion of those rationed by banks, but not the poorest of the study households.

New technologies and export opportunities have often contributed to dualistic agrarian structure and intense social conflict in Latin American. A switching regression model developed in this paper explicitly links export adoption and land accumulation patterns controlling for pre-existing differentiation processes. Applied to survey data gathered from peasant households in Guatemala, the model provides evidence of equitable change induced by a recent export boom in vegetable crops. However, the optimism of these results is tempered by consideration of the unfavorable longer term market dynamics confronting small-scale producers. Keywords: Agro-exports; Agrarian structure; Adoption; Peasants; Land access JEL classification: O13, O54, Q12

Agro-export growth has been associated with land concentration and employment instability. In the wake of 'exclusionary' agro-export booms, land market reform has been proposed as a way to improve peasant land access through the market. Developing a model of the economic competitiveness of different classes of producers, this paper evaluates the likely effectiveness of land market reform. While the model itself gives ambiguous answers, numerical simulation identifies a large gap between market price and peasants' ability to pay for land. Among the components of land market reform policy, progressive land taxation appears unlikely to close that competitiveness gap, while farm land mortgage banks appear more likely to mitigate exclusionary aspects of growth.

This paper develops a dynamic theoretical model to assess the impact of asset insurance on poverty and the cost of social protection in developing countries. We analyze the model under two technological assumptions: a standard, globally concave production technology, and a fixed cost technology that creates a non‐convex production set and admits the possibility of multiple equilibria and a poverty trap. Under both assumptions, the introduction of an asset insurance market reduces poverty and the costs of social protection. Under the non‐convex production set, there is a strong public finance case for insurance premium subsidies that target poor and vulnerable households and bring them into the insurance market. While the challenges of making microinsurance markets work are multiple, this analysis suggests the potential gains to solving these challenges are substantial. [ABSTRACT FROM AUTHOR]