SAGA Progress Report
October, 2003

• The role of producer organizations in reducing smallholder vulnerability: Led by Tegemeo, this sub-project analyzes the impact of producer organizations on smallholder market access and vulnerability to income shocks, price, and yield volatility, identifying what organizational functions prove most effective and how these are most efficiently and reliably provided, especially to poorer smallholders. The Tegemeo project is augmented by dissertation research by a Kenyan economics Ph.D. candidate at Cornell, Andrew Mude, doing closely related research with partial funding from a SAGA competitive small grant and from the Rockefeller Foundation. Mr. Mude began field data collection in September 2003 and will complete his field work early in 2004.
  
  
• Agricultural marketing systems, price volatility and vulnerability of smallholder producers and poor consumers: Led by the Kenya Institute for Public Policy Research and Analysis (KIPPRA), this sub-project studies changing marketing systems and household strategies for coping with market risk, seeking in particular to explain and identify effective strategies to reverse the apparent widespread retreat toward subsistence production by many smallholders.
  
  
• Improving factor market access to reduce rural vulnerability: Led by the University of Nairobi’s Department of Agricultural Economics, this research focuses in particular on rural land and finance markets, and how increasing land pressure and conflict and the changing shape of liberalizing financial sectors affect smallholders’ security of access to land.
  
  
• Safety nets in marginal areas: Led by Cornell and Clark Atlanta, with collaboration from Syracuse University (all on non-SAGA funding), this subproject focuses on the interrelationship between public safety nets, such as food aid and livestock destocking/restocking programs, and private assistance schemes based on social insurance mechanisms, informal lending, and altruistic transfers, particularly in arid and semi-arid areas especially prone to climate, conflict and market shocks. This work has already generated three working papers.

• The role of producer organizations in enhancing smallholder market participation: Led by Tegemeo, this sub-project is identifying appropriate institutional frameworks for producer organizations so as to enhance small farmers’ participation and efficiency in input and output markets.
  
  
• Decentralization and participation: Led by IPAR, this sub-project focuses the decentralization of and participation in agricultural extension services in rural Kenya, examining the level, scope, nature, and quality of popular participation in decentralized allocation mechanisms, fiscal accountability under these arrangements, and the factors that determine the capacity and effectiveness of the poor participating in and benefiting from these programs.
  
  
• Community groups and networks: Led by Cornell (on non-SAGA funding), this sub-project studies social networks and community groups with respect to their effects on risk-taking, technology adoption, and livelihood strategy choice in rural communities. One component of this has been funded by the Rockefeller Foundation for a dissertation project by Cornell education Ph.D. candidate David Amudavi, a lecturer at Kenya’s Egerton University. Another component has been funded by Cornell University, the National Science Foundation, and the Social Science Research Council, for dissertation field research by Cornell agricultural economics Ph.D. candidate Heidi Hogset. Both Mr. Amudavi and Ms. Hogset began field work in August, 2003, and will remain in Kenya for approximately one year.
  

• "Decomposing Producer Price Risk: A Policy Analysis Tool With An Application to Northern Kenyan Livestock Markets," October 2002, Christopher B. Barrett and Winnie K. Luseno. This paper introduces a simple method of price risk decomposition that determines the extent to which producer price risk is attributable to volatile inter-market margins, intra-day variation, intra-week (day of week) variation, or terminal market price variability. We apply the method to livestock markets in northern Kenya, a setting of dramatic price volatility where price stabilization is a live policy issue. In this particular application, we find that large, variable inter-market basis is the most important factor in explaining producer price risk in animals typically traded between markets. Local market conditions explain most price risk in other markets, in which traded animals rarely exit the region. Variability in terminal market prices accounts for relatively little price risk faced by pastoralists in the dry lands of northern Kenya although this is the focus of most present policy prescriptions under discussion.
  
  
• "Social Identity and Manipulative Interhousehold Transfers Among East African Pastoralists," October 2002, Marieke Huysentruyt, Christopher B. Barrett, and John G. McPeak. We model interhousehold transfers between nomadic livestock herders as the state-dependent consequence of individuals’ strategic interdependence resulting from the existence of multiple, opposing externalities. A public good security externality among individuals sharing a social (e.g., ethnic) identity in a potentially hostile environment creates incentives to band together. Self-interested interhousehold wealth transfers from wealthier herders to poorer ones may emerge endogenously within a limited wealth space as a means to motivate accompanying migration by the recipient. The distributional reach and size of the transfer are limited, however, by a resource appropriation externality related to the use of common property grazing lands. When this effect dominates, it can induce distributionally regressive transfers from ex ante poor households who want to relieve grazing pressures caused by larger herds. As compared to the extant literature on transfers, our model appears more consistent with the limited available empirical evidence on heterogeneous and changing transfers patterns among east African pastoralists.
  
  
• Bayesian Herders: Updating of Rainfall Beliefs In Response To External Forecasts," Revised March 2006, Travis J. Lybbert, Christopher B. Barrett, John G. McPeak, and Winnie K. Luseno. TTemporal climate risk weighs heavily on many of the world’s poor. Model-based climate forecasts could benefit such populations, provided recipients use forecast information to update climate expectations. We test whether pastoralists in southern Ethiopia and northern Kenya update their expectations in response to forecast information. The minority of herders who received these climate forecasts updated their expectations for below normal rainfall, but not for above normal rainfall. This revealed preoccupation with downside risk highlights the potential value of better climate forecasts in averting drought-related losses, but realizing any welfare gains requires that recipients strategically react to these updated expectations.
  
  
  
• "Smallholder Identities and Social Networks: The Challenge of Improving Productivity and Welfare," July 2003, Christopher B. Barrett. This paper proposes a general framework for resolving the puzzle of how to reconcile the mass of recent evidence on the salutary effects of social capital at the individual level with the casual, larger-scale observation that social embeddedness appears negatively correlated with productivity and material measures of welfare. It advances an analytical framework that not only explains individual productivity or technology adoption behavior as a function of the characteristics or behaviors of others, but that also explains the aggregate properties of social systems characterized by persistently low productivity. Examples from Kenya and Madagascar are used to illustrate the phenomena discussed.
  
  
• "Rural Poverty Dynamics: Development Policy Implications," September 2003, Christopher B. Barrett. This paper, prepared as a plenary address to the 25th triennial meetings of the International Association of Agricultural Economists, held in Durban, South Africa, summarizes a few key findings from a rich and growing body of research on the nature of rural poverty and, especially, the development policy implications of relatively recent findings and ongoing work. Perhaps the most fundamental lesson of recent research on rural poverty is the need to distinguish transitory from chronic poverty. The existence of widespread chronic poverty also raises the possibility of poverty traps. Barrett discusses some of the empirical and theoretical challenges of identifying and explaining poverty traps. In policy terms, the distinction between transitory and chronic poverty implies a need to distinguish between "cargo net" and "safety net" interventions and a central role for effective targeting of interventions. The paper uses data from Kenya and Madagascar to illustrate the core points.
  
  
• "Fractal Poverty Traps," Published January 2006, Christopher B. Barrett and Brent M. Swallow. This paper offers an informal theory of a special sort of poverty trap, one in which multiple dynamic equilibria exist simultaneously at multiple (micro, meso and/or macro) scales of analysis and are self-reinforcing through feedback effects. Small adjustments at any one of these levels are unlikely to move the system away from its dominant, stable dynamic equilibrium. Governments, markets and communities are simultaneously weak in places characterized by fractal poverty traps. No unit operates at a high-level equilibrium in such a system. All seem simultaneously trapped in low-level equilibria. The fractal poverty traps formulation suggests four interrelated strategic emphases for poverty reduction strategies.
  
  
• "Poverty Traps and Safety Nets," September 2003, Christopher B. Barrett and John G. McPeak. This paper uses data from northern Kenya to argue that the concept of poverty traps needs to be taken seriously, and that if poverty traps indeed exist, then safety nets become all the more important. However, as presently practiced, safety nets based on food aid appear to be failing in northern Kenya.
  

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