Paul B. Siegel

Can Financial Markets be Tapped to Help Poor People Cope with Weather Risks

Poor households in rural areas are particularly vulnerable to risks that reduce incomes and increase expenditures. Most past research has focused on risk-coping strategies for the rural poor, specially on micro-level and household actions. These are risks that can been shared within a community or extended family. These strategies are effective for independent risks, but ineffective for covariate or systemic risks. The authors focus on private and public mechanisms for managing covariate risk for natural disasters. When many households within the same community face risks that create losses for all, traditional coping mechanisms are likely to fail. Such covariate risks are not uncommon in many developing countries, especially where farming remains a major source of income. The authors focus on risks related to weather events (such as excess rain, droughts, freezes, and high winds) that have a severe impact on rural incomes. Weather insurance could cover the covariate risk for a community of poor households through formal and informal risk-sharing arrangements among households that are purchasing these weather contracts. Given recent Mexican innovations targeted at helping the poor cope with catastrophe weather events, the authors use Mexico as a case study. In Mexico, poor households are exposed to systemic risks, such as droughts and floods, that affect the economic livelihood of their region. Catastrophic insurance is useful for small farmers, although commercially oriented small farmers may wish to obtain coverage for less catastrophic events. Weather insurance could meet this need. It pays out according to the frequency and intensity of specific weather events. Because weather insurance depends on the occurrences and objective measure of intensity of a specific event, it does not require individual farm inspection that can be very costly for small farm. The authors argue that a key issue of delivering insurance to small farmers is the existence of producer organizations. In Mexico, the farmer mutual insurance funds provide a good example. These funds provide insurance to their members by pulling together resources to pay for future indemnities and reinsures itself from major systemic risks that could hurt simultaneously all their members.

Dealing With the Coffee Crisis in Central America: Impacts and Strategies

Current coffee prices are at record lows and below the cost of production for many producers in Central America. Moreover, the coffee crisis is structural, and changes in supply and demand do not indicate a quick recovery of prices. So, coffee producers in Central America are facing new challenges-as are coffee laborers, coffee exporters, and others linked to the coffee sector. Coffee plays a major economic role in Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. The coffee crisis is actually part of a broader rural crisis caused by weather shocks (such as Hurricane Mitch and droughts), low international agricultural commodity prices, and the global recession. These challenges call for new strategies for Central American countries aimed at broad-based sustainable development of their rural economies. The authors deal with the impact of the coffee crisis and strategies to deal with it. They include an analysis of the international coffee situation and country-specific analyses. The authors explore options and constraints for increased competitiveness and diversification, and discuss social, environmental, and institutional dimensions of the crisis. The authors conclude that there are specific solutions that can be pursued for the coffee sector. Some are already being applied, but more can be done in a more systematic way. Also, there is a need for safety nets to deal with the short-term impact of the crisis. Longer-term solutions are to be found in increased competitiveness and diversification in the context of broad-based sustainable rural economic development.

Attracting Retirees as an Economic Development Strategy: Looking into the Future

Attracting retirees has been promoted as an economic development strategy for rural communities. Implicit in efforts to attract retirees is the assumption that retirees will continue to migrate at the same rate, bringing with them relatively high incomes and relatively low demands for services. Using currently available information, this article examines this assumption, and provides a less rosy picture, by analyzing how changes in demographics, income, wealth, and living preferences result in future retirement decisions that differ from the current pattern. This study should provide additional guidance and caution to planners and policy makers contemplating retiree recruitment as a rural development strategy, as well as directions for further research.

Portfolio models and planning for export diversification: Malawi, Tanzania and Zimbabwe

Evidence is presented regarding strengths and limitations of portfolio approaches as applied to diversifying export earnings. An empirical application using data from Malawi, Tanzania, and Zimbabwe is used to demonstrate these strengths and limitations. Modifications of the typical portfolio approach to export diversification are presented; these modifications help make the approach more plausible for use in developing countries. The modified approach is shown to provide guidance to policymakers who seek simultaneously to increase export earnings and reduce their instability.

Decomposing Sources of Regional Growth with an Input-output Model: A Framework for Policy Analysis

Decomposition of an extended input-output model can provide insights into the relationship between a regions changing economic structure and its performance. Standard decomposition techniques are augmented and adapted to generate a conceptual framework for identifying potential sources of regional growth and subsequent impacts of alternative development strategies. The conceptual framework is a heuristic device that also can be used for applied policy analysis. As such, this paper provides a foundation for more elaborate empirical studies in the future.

Climate change: Challenges for social protection in Africa

This paper explores the role of social protection in helping Africa adapt to climate change. The increase in covariate (environmental and health) risks due to ongoing and future climate changes, and the demonstrated adverse impacts of such risks, make it important to scale up interventions to reduce household vulnerability. Efforts under way to gear up adaptation to climate change in Africa must be responsive to the needs of the poor. Social protection can contribute to this with its established frameworks for vulnerability reduction. Particular instruments to consider include social funds for community-based adaptation, safety nets designed flexible to respond to climatic shocks and natural disasters, and skills development, micro finance, and assisted migration for changing livelihoods.

Export commodity production and broad-based rural development: coffee and cocoa in the Dominican Republic

An estimated 80,000-100,000 Dominican farmers produce coffee and cocoa, nearly 40 percent of all agricultural producers. The sectors also provide employment for tens of thousands of field laborers and persons employed in linked economic activities. The majority of coffee and cocoa producers are small-scale and most are located in environmentally sensitive watersheds. Recent trends in international commodity markets have challenged the survival of both sectors. Production is characterized by low yields and uneven quality, while periodic hurricanes have contributed to a lackluster and unstable record of output and exports. Despite these conditions, most experts acknowledge the fact that appropriate agro-ecological conditions exist in Dominican Republic for production of high-quality coffee and cocoa. To be competitive and sustainable, some changes must take place in the coffee and cocoa sectors. The objective of this study is to provide an overview of the coffee and cocoa sectors, to identify major problems, and to suggest possible strategies to deal with these problems. The authors conclude that if the objectives of the government are poverty reduction, environmental protection and overall well-being of rural society, it is critical to move beyond a commodity-specific approach to a broader rural development focus on households, regions and environments where coffee and cocoa are currently being grown.