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Prices and farmer investment

Evidence from experimental studies









FAO & IPA. 2022. Prices and farmer investment – Evidence from experimental studies. Investment brief. Rome, FAO.



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    Book (series)
    Effects of land tenure rights formalization on household investments – The case of PRODEP in Nicaragua
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    This study analyses the impacts of titling on tenure security, property value, access to credit, and household investments in the departments of Nueva Segovia, Jinotega y Chinandega, which are covered by Nicaragua’s Land Administration Programme (PRODEP). The programme has been in operation for over two decades, prioritized and sustained by the national government, International Financial Institutions, and other donors, targeting the poorest and most vulnerable households. Using quasi-experimental econometric techniques, namely propensity score techniques, and instrumental variables, we find that titling obtained through PRODEP, either individually or jointly, has significantly contributed to an increase in beneficiaries’ perception of both land tenure security and increased land value. We also find that the perception of an increase in owners’ land value was higher for women covered by the later phase of the program. While the overall findings are encouraging, we suggest that potential investments in land and housing by landowners be further enhanced through strengthening synergies with complementary programmes for local economic development, housing, and poverty reduction.
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    Book (stand-alone)
    Evaluating the impacts of cash and complementary agricultural support interventions in fragile settings
    The case of Somalia
    2022
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    This study examines the FAO cash plus agriculture program in Somalia. This multi-faceted intervention provides agricultural inputs, training and cash transfers to vulnerable agro-pastoralist households living in districts and villages that experienced severe weather shocks. We exploit variations in the implementation of this program to assess the effect of receiving inputs only and inputs plus cash on a range of protective and productive outcomes. Specifically, we make use of household survey data collected in 2019 and apply a quasi-experimental Inverse Probability Weighted Regression Analysis (IPWRA) matching approach to estimate the impact of the two different interventions on food security, assets, adoption of inputs and adoption of agricultural practices. We find positive and significant impacts on a number of productive outcomes and some difference between the two treatments: while inputs seem to increase asset wealth, cash plus reduces food insecurity and higher levels of income diversification, suggesting that the cash component facilitates investments in livelihoods diversification. Moreover, we find evidence of heterogeneous impacts under conditions of weather shocks, and between socio-economic segments of the population.
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    Policy brief
    Price transmission in food markets 2023
    This policy brief assesses whether domestic food markets in developing countries respond to changes in international prices and how fast. Price transmission – namely the extent to which changes in international food prices lead to changes in local food prices – is central to assessing the functioning of markets. The Law of One Price suggests that price transmission is complete, with the prices of a food product sold on competitive foreign and domestic markets differing only by transportation costs. Such a complete price pass-through is attained by trade. Changes in supply and demand in one country affect prices, which will in turn instigate trade with other countries. As trade restores the market equilibrium, prices in the domestic market tend to equalize with those in foreign markets except for transport costs - hence the term “Law of One Price”. Markets are important channels for economic integration, but they can also transmit shocks. In this respect, the policy brief shows that high import dependence and a liberalized trade regime are associated with faster price transmission. By contrast, countries experience a more incomplete pass-through of changes in international prices when trade costs are comparatively higher and trade policies are more restrictive. Finally, the analysis in this policy brief also suggest that when countries are import dependent and domestic markets are less integrated with international markets, consumers prices are generally much higher than world prices.

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